Crypto Tax Guide for India: ITR Forms, Airdrops, NFTs, TDS, and Business Income 

Cryptocurrencies in India are classified as Virtual Digital Assets (VDAs) and taxed at a flat 30% on gains, with no deductions except the cost of acquisition. A 1% TDS applies on transactions above ₹10,000 (₹50,000 for certain taxpayers) to enhance compliance.

Investors must report crypto income in ITR-2 (for capital gains) or ITR-3 (for business income), with mandatory disclosure in Schedule VDA. Airdrops and staking rewards are taxed as “Income from Other Sources,” while NFT sales follow the same 30% rule.

Losses cannot offset other gains, and undisclosed crypto income may attract heavy penalties (up to 60%). Businesses trading crypto can claim expenses but must file under ITR-3. Staying compliant requires meticulous record-keeping and verifying TDS credits to avoid legal risks.

Crypto Tax Guide for India: ITR Forms, Airdrops, NFTs, TDS, and Business Income 

Cryptocurrency taxation in India has evolved significantly, with strict regulations and high tax rates shaping how investors and traders report their crypto income. Whether you’re dealing with Bitcoin, Ethereum, NFTs, or airdrops, understanding the tax implications is crucial to avoid penalties and ensure compliance.  

How Cryptocurrencies Are Taxed in India 

Under Section 115BBH of the Income Tax Act, **profits from selling, swapping, or spending virtual digital assets (VDAs)**—including cryptocurrencies and NFTs—are taxed at a flat 30% rate, plus applicable cess and surcharge. Unlike traditional capital gains, crypto losses cannot be offset against other income or carried forward.  

Additionally, a 1% TDS (Tax Deducted at Source) applies on crypto transactions under Section 194S, increasing transparency and traceability.  

Key Tax Rules for Crypto Investors 

• 30% flat tax on gains from crypto transfers (no deductions except acquisition cost).  

• 1% TDS on transactions exceeding ₹10,000 (₹50,000 for specified taxpayers).  

• No set-off or carry-forward of crypto losses.  

• Mandatory reporting of all transactions by exchanges to tax authorities. 

Which ITR Form Should You Use? 

Your choice of Income Tax Return (ITR) form depends on how you earn crypto income:  

• ITR-2: For individuals with capital gains from crypto (e.g., selling Bitcoin after holding).  

• ITR-3: If you’re actively trading crypto as a business. 

The latest ITR utilities now include Schedule VDA, where you must disclose:  

• Acquisition and sale dates  

• Cost of purchase  

• Sale proceeds  

• TDS deducted (if any) 

Pro Tip: Even if you incur a loss, report it in your ITR to avoid scrutiny.  

Taxation of Airdrops, NFTs, and Staking Rewards 

1. Crypto Airdrops

Airdrops (free tokens distributed as promotions) are taxed as “Income from Other Sources” at your applicable slab rate. The taxable value is based on the fair market value (FMV) at the time of receipt.  

Catch: If you later sell the airdropped tokens, 30% tax applies on any gains, potentially leading to double taxation.  

2. NFTs (Non-Fungible Tokens)

NFT sales are taxed similarly to crypto—30% on profits, with no loss offset. If you receive NFTs as gifts or rewards, their FMV is taxable as income.  

3. Staking, Mining, and Referral Bonuses

• Staking rewards → Taxable as “Other Income” (slab rate).  

• Mining income → Treated as business income if done professionally.  

• Referral bonuses → Taxable as per your income slab. 

Crypto as Business Income: How It Works 

If you’re actively trading crypto, your earnings may qualify as business income (reported via ITR-3). Unlike capital gains, business income allows deductions for expenses like trading fees, software costs, and electricity (for miners).  

Key Consideration:  

• Business profits are taxed at slab rates (not flat 30%).  

• Maintain proper books of accounts for audits. 

TDS on Crypto Transactions: What If It’s Not Deducted? 

If the buyer fails to deduct 1% TDS, the seller remains liable for the full capital gains tax. You must:  

• Report the transaction in your ITR.  

• Pay the 30% tax (if applicable).  

• Keep transaction records to avoid penalties. 

Warning: Non-disclosure may lead to 60% penalty under undisclosed income provisions.  

Final Tips for Crypto Tax Compliance 

✅ Track every transaction—dates, amounts, and purpose. 

✅ Use Schedule VDA in ITR-2/ITR-3 for accurate reporting. 

✅ Verify TDS credits (Form 26AS/AIS). 

✅ Consult a tax expert if dealing with DeFi, mining, or complex trades.  

India’s crypto tax regime is stringent, but with careful planning, investors can stay compliant while minimizing liabilities. Stay updated with Budget 2025 changes, as crypto regulations continue to evolve.