How to Declare Cryptocurrency Income in Your ITR This Financial Year.

How to Declare Cryptocurrency Income in Your ITR This Financial Year

Cryptocurrency transactions in India are now subject to a flat 30% tax under Section 115BBH, plus a 1% TDS on disposals exceeding ₹50,000 per financial year.

Which ITR Form Should You Use?

• ITR‑2: For salaried individuals or those with capital gains (crypto, equity, mutual funds), foreign income, dividends, or multiple house properties. Avoid using ITR-1 or ITR-4 if your LTCG or crypto gains exceed ₹1.25 lakh.

• ITR‑3: Required for freelancers, professionals, or regular traders using crypto as part of a business or profession. This form includes detailed sections for VDAs and trading (PGBP).

Reporting Crypto Gains: Key Updates

ITR-2 and ITR-3 now separate capital gains into:

• Before 23 July 2024: prior to the tax rate change.

• After 23 July 2024: taxed at the new flat 30%.

For ITR‑3, crypto income is entered under “Profits and Gains from Business and Profession (PGBP)”, while ITR‑2 includes a dedicated Schedule VDA for virtual digital assets .

Prepare Your Documents

Before filing, ensure you have:

• Form 16 (if salaried)

• Form 26AS, AIS, and TDS summary

• Exchange/Wallet crypto transaction report detailing acquisitions, transfers, and gains

• Capital gains calculation statements

• Form 16E, if 1% TDS was deducted on crypto either by you or by the exchange.

Step-by-Step Timeline for Filing

1. Calculate gains: Consolidate transactions across wallets/exchanges.

2. Classify gains: Identify gains before and after 23 July 2024.

3. Download tax reports: Use tools like Koinly or Cryptact with Indian settings to generate INR-based summaries including Schedule VDA and capital gains.

4. Choose correct ITR form: ITR‑2 or ITR‑3 based on your income profile.

5. Fill statements: Populated forms include Schedule VDA for crypto; ensure data matches Form 26AS TDS records.

6. Review & verify: Double-check entries, calculations, and TDS reporting.

7. Submit through portal: ITR‑2 online filing is live since July 18, 2025, with pre-filled data from Form 26AS, AIS, and more.

8. Deadline: September 15, 2025 for individuals and non‑audit assessees .

Why Compliance Is Essential

• Tax notices and investigations: The Income Tax Department is actively identifying undeclared crypto income and issuing notices under Schedule VDA.

• Technological enforcement: Using AI and analytics, authorities matched TDS data from Virtual Asset Service Providers against ITR disclosures .

• Penalties: Discrepancies above ₹1 lakh may lead to communication under the government’s NUDGE campaign and further scrutiny.

Common Pitfalls to Avoid

• Not maintaining detailed transaction records (date, cost, wallet/exchange) for accurate gain calculation 

• Assuming crypto losses can offset other capital gains—they cannot 

• Using ITR‑1 or ITR‑4 when crypto earnings exceed ₹1.25 lakh or if crypto income is present

• Failing to reconcile TDS with Form 26AS, especially for 1% deductions.

Final Tips

• Filing the correct ITR ensures your return isn’t rejected or flagged.

• Maintain clear documentation—exchange exports, tax tools, Form 26AS.

• Use government-supported formats and templates to reduce errors.

• If in doubt, consult a chartered accountant with crypto-filings expertise.

Accurately reporting your cryptocurrency income this financial year ensures compliance, avoids penalties, and keeps your tax record clean.