Crypto ITR Filing: How To Pay Crypto Tax In India? Things To Remember & Mistakes To Avoid

To ensure compliance and prevent penalties, filing cryptocurrency taxes in 2025 demands close attention to every aspect. Calculating your total taxable income from all Virtual Digital Assets (VDAs) is the first step in paying crypto taxes in India. This covers earnings from staking, mining rewards, trading or selling cryptocurrency, and any cryptocurrency obtained through gifts or airdrops. Regardless of the investor's income tax slab, all gains from the transfer of VDAs are subject to a flat 30% plus applicable surcharge and 4% cess under Section 115BBH of the Income Tax Act. Most taxpayers must pay 1% Tax Deducted at Source (TDS) on cryptocurrency transactions over Rs 50,000 per year, while some persons, such as salaried workers, must pay Rs 10,000.

To file your income Tax Return (ITR) for crypto earnings in India for the Financial Year 2025-26 (Assessment Year 2026-27), you must follow certain tax laws for Virtual Digital Assets (VDAs), which include NFTs and cryptocurrencies. Income up to Rs 12 lakh is exempt from income tax for FY26 under the New Tax Regime (NTR); however, income from VDAs does not count in this exemption. Based on an interview with Mr Edul Patel, Co-founder and CEO of Mudrex, here is a comprehensive tutorial on how to pay cryptocurrency taxes in India by the deadline, which is usually July 31, 2026, in order to avoid fines.

1. How to pay crypto tax in India?

Paying crypto taxes in India starts with calculating your total taxable income from all Virtual Digital Assets (VDAs). This includes gains from trading or selling crypto, earnings from staking, mining rewards, and any crypto received through airdrops or gifts. As per Section 115BBH of the Income Tax Act, all gains from the transfer of VDAs are taxed at a flat 30%, irrespective of the investor's income slab. The only permissible deduction is the cost of acquisition-expenses such as transaction fees, infrastructure costs, or gas fees are not deductible.

In addition, a 1% TDS (Tax Deducted at Source) is applicable on each transaction above a specific threshold. This mechanism allows the government to monitor crypto activity and investor patterns more closely.

To simplify the filing process, investors should maintain clear and accurate records of every crypto transaction-buy and sell prices, dates, wallet addresses, and profits or losses. Proper bookkeeping ensures transparency and reduces the risk of errors when reporting during tax season.

2. Crypto ITR Filing Checklist: Things to remember

Filing crypto taxes in 2025 requires careful attention to detail to ensure compliance and avoid penalties. One of the most important aspects is choosing the correct ITR form based on your source of income. If you've made gains from crypto as a capital investment as a retail investor, ITR-2 is applicable. However, if crypto trading is your primary source of income or you're operating a crypto-related business, ITR-3 should be used to report business income.

Additionally, one should consider the 1% Tax Deducted at Source (TDS), which applies to transactions exceeding ₹50,000 annually for individuals (₹10,000 for businesses). Most Indian exchanges automatically deduct TDS and deposit it with the government. Investors can claim this as a tax credit while filing returns. It's crucial to verify Form 26AS to ensure the TDS amount matches what's been reported by the exchange. If there's any excess deduction, you're eligible for a refund.

However, if you're using foreign crypto exchanges, the responsibility of deducting and depositing TDS falls on you. Failing to do so may attract penalties and interest. Maintaining accurate records and reviewing TDS details in advance can make your tax filing process smooth and hassle-free.

3. Mistakes to Avoid While Disclosing Crypto Gains

A key mistake many investors make is trying to offset losses against income from crypto. Under Section 115BBH of the Income Tax Act, this is not permitted-losses from Virtual Digital Assets (VDAs) can't be adjusted against any other income. Even if you've incurred losses, it is essential to report them.

Sometimes, investors fail to file returns before the due date, especially if they've incurred a capital loss. Filing late disqualifies you from carrying forward those losses to future financial years, which could be strategically important for high-volume investors.

Another common oversight involves airdrops and crypto gifts. These are not tax-free and must be reported under 'Income from Other Sources'. Many investors mistakenly assume such earnings don't need to be disclosed, leading to compliance issues. Airdrops and gifting crypto are regarded by the IT department as taxable income, and improper reporting of these may result in an investigation or sanctions.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.