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Do crypto taxes intimidate you as a newcrypto investor? Don’t worry, you're not alone.
Despite facing some of thehighest taxes in the world, millions of Indian investors continue to invest inCrypto.
But with the Income Tax Department's (ITD) increasing scrutiny ofBitcoin and other cryptocurrencies, it's essential to understand how India'scrypto tax laws work.
That's why we've put together the ultimate crypto taxguide for 2026 to help you navigate the world of crypto taxes and staycompliant with the ITD.
From understanding the tax implications ofbuying and selling cryptocurrencies to filing your tax returns, our guidecovers everything you need to know about crypto taxation in India. So, sitback, relax, and let us guide you through the ins and outs of crypto tax inIndia.
The Indian government did not have adefinitive stance on classifying Crypto or imposing taxes on them before 2022.
However, during the 2022 Budget session, Finance Minister Nirmala Sitaramanintroduced Section2(47A) into the Income Tax Act, which defines Virtual DigitalAssets (VDAs) in detail and covers all types of crypto assets,including cryptocurrencies, NFTs, tokens, and others. You have to pay a 30% (plus applicable surcharge and 4% cess) tax rate on any profits incurred fromcrypto transactions.
According to the ITD, if you have disposedof Crypto (sold Crypto or traded it for another crypto) or earned Crypto(received Crypto through airdrop or staking rewards), you must pay crypto taxesin India.
Unlike other asset classes, there is no tax benefit to holding Cryptofor the long term. You must pay taxes on crypto income regardless of how longyou hold it.
Moreover, you may now have to face anadditional Tax at Source (TDS) under section 194S of Section 2(47A) ontransferring crypto assets on or after July 1, 2022.
Example:
Consider the following transactions:
02/01/25 - Ravi bought 3 BTC for ₹35,00,000each in Binance Wallet
12/02/25 - Ravi bought 2 ETH for ₹1,50,000each in Binance Wallet
15/05/25 - Ravi sells 3 BTC for ₹50,00,000each from Binance Wallet
23/06/25 - Ravi sells 2 ETH for ₹2,00,000each from Binance Wallet
Now as seen in the above ledger oftransactions, two disposals were made. So let’s look at the gains incurred fromeach disposal individually.
1st Disposal
3 BTC sold for ₹50,00,000 each
These BTC tokens were acquired for₹35,00,000 each.
Cost Basis = ₹25,00,000
Disposal Amount = ₹50,00,000
Capital gain/loss = Disposal Amount - CostBasis = ₹50,00,000 - ₹35,00,000 = ₹15,00,000(for 1 BTC token)
Total Gain from 3 BTC tokens = 3*15,00,000= ₹45,00,000
2nd Disposal
2 ETH sold for ₹2,00,000 each
These tokens were acquired for ₹1,50,000each.
Cost Basis = ₹1,50,000
Disposal Amount = ₹2,00,000
Capital Gain/loss = Disposal Amount - CostBasis = ₹2,00,000 - ₹1,50,000 = ₹50,000(for 1 ETH)
Total Gain for 2 ETH tokens = 2*50,000 =₹1,00,000
Collective gain from both disposals =₹45,00,000 + ₹1,00,000 = ₹46,00,000
Now these gains will be taxed at a flat 30%tax rate, not including the cess and surcharge.
If you are considering avoiding reportingsome of your transactions on your tax return to the Income Tax Department(ITD), the answer is a resounding no.
The ITD has complete access to yourrecords and can easily cross-check your tax report with their database toidentify discrepancies.
In India, the ITD keeps track ofcrypto-related transactions, including the number of crypto assets held inwallets and exchanges, by implementing Know-Your-Customer (KYC) policies.
Localexchanges in India are also required to comply with this policy.
Additionally, various global initiativesrequire private companies to share their customers' data with tax authoritiesworldwide to combat criminal activities such as money laundering. Usingblockchain analytics tools, tax authorities can trace the movement of cryptoassets between exchanges and wallets, providing insight into Indian taxpayers'private crypto holdings.
The ITD did not mention any term like"capital gain tax" in their official notification. Instead, they haveimplemented a flat income tax rate for all retail investors, traders, orindividuals who transfer crypto assets in a particular financial year withoutdifferentiating between short-term and long-term gains. If you engage in any ofthe following transactions, you may be subject to a flat tax rate.
You must pay a 30% (plus applicable surcharge and 4% cess) tax rate on any profits made from the above-mentioned transactions. The 30% crypto tax rate will be the same irrespective of the nature of income i.e., it does not matter if it is an investment or business income and is irrespective of the holding period.
While you'll pay a flat 30% tax on your profits, determining your cost basis is the first step in figuring out how much you owe.
To calculate capital gains, you'll need to know the sales price (proceeds) and purchase price (cost basis) of the Crypto you sold or transferred. For instance, if you sell ETH for ₹ 2,00,000, your sales price or proceeds is ₹ 2,00,000.
The formula for calculating capital gainsis straightforward: selling price minus purchase price equals capital gains.
However, determining your purchase pricecan be more complicated if you bought the cryptocurrency multiple times. Inthis case, you'll need to determine which units were sold first. In India, youcan use the First-in First-out (FIFO) accounting method as it is advised byITD, which means that the earliest acquired units are sold first.
Example 1
Let's say you invested INR 80,000 in Cryptoin FY2025 and sold the Crypto for INR 1,20,000, resulting in a profit of INR40,000. Now as an investor, you’re subject to a flat 30% crypto tax, you mustpay INR 12,000 (plus surcharge and cess) as a tax on the crypto income for thatfiscal year.
Please note: If you buy or sell Crypto, you'll only be taxed on the incomeor profit you make during the transaction. So if you hold onto your Crypto andits value goes up, you will only have to pay taxes on those unrealized gainsonce you decide to sell it.
Example 2
Transaction 1: You bought Bitcoin for INR 3 Lakhs and sold it for INR 4Lakhs.
Transaction 2: You bought Litecoin for INR 1.5 Lakhs and sold it for INR 1Lakh.
After calculating your gains and lossesfrom both transactions, your net income from the above transactions is INR 1Lakhs, the profit earned from the Bitcoin transaction.
For FY 2025-26, the applicable tax rate forprofit is 30%. So, you'll owe INR 30,000 (plus surcharge and cess) as a tax onyour crypto profit.
Crypto losses aren't tax-deductible inIndia according to clause115BBH of Section 2(47A which states that losses incurred from thetransfer or sale of crypto assets cannot be used to offset any other income.
Let's say you incur a net loss of Rs 2 Lacsfrom selling Crypto during the year, your tax liability for crypto transferwill be zero for the current year.
However, this loss of Rs 2 Lacs cannot becarried forward to the next financial year and used to offset future income.Essentially, the loss of Rs 2 Lacs will not benefit you in future tax periodswhen generating taxable income from the crypto business.
While the ITD has not offered clearguidance on lost or stolen crypto assets, we have analyzed past judgments onissues of losses or theft of other assets.
Our analysis shows that you are notrequired to pay taxes on lost or stolen crypto assets.
However, due to the ITD's strict stance onoffsetting crypto losses against gains, you cannot offset losses from lost orstolen crypto assets against any gains.
The examples we’ve used so far to explaincapital gains and crypto income calculations are fairly simplistic and do notrepresent real-world transactions.
Transactions in the real world involvemultiple assets of the same kind acquired on different dates and prices, makingthe overall process more complicated.
This highlights the need for a well-definedmethod to calculate crypto gains and losses, which are called accountingmethods.
Each country specifies a convenient accounting method to maintainhomogeneity across all capital gains calculations.
The ITD in India recognizes the FIFO(First-In-First-Out) accounting method for cost-basis calculations.
The FIFOaccounting method states that the first asset you buy is the first asset yousell.
Consider the following set oftransactions-
10/01/25 - Sahil buys 1 BTC for ₹35,00,000
13/03/25 - Sahil buys 1 BTC for ₹52,00,000
17/05/25 - Sahil buys 1 BTC for ₹55,00,000
23/06/25 - Sahil sells 1 BTC for ₹53,00,000
If we consider the FIFO accounting methodto calculate the cost basis for this disposal,
The disposed of BTC was acquired on 10/01/25for ₹35,00,000
Cost Basis = ₹35,00,000
Disposal Amount = ₹53,00,000
Capital Gain/loss = Disposal Amount - CostBasis = ₹35,00,000 - ₹53,00,000 = ₹18,00,000
Who wouldn't want to find ways to save someextra money? Well, we certainly do, and that's why we've got some practicalstrategies to help you avoid paying taxes on crypto investments in India.
Gaining exposure to a particular digitalcurrency through indirect means can be an effective way to save on crypto tax.Global investment platforms have recently launched portfolios that allow Indiancrypto investors to obtain exposure to a digital currency without buying orinvesting in it.
Investing in a fund that tracks the priceof a particular crypto, like the Grayscale Bitcoin Trust, can provide indirectexposure to Bitcoin without directly buying it.
This can help save on taxes andprovide diversification.
The taxation rate on profits from cryptosales is calculated based on taxable income.
Selling crypto assets in alow-income year can result in a lower income tax rate, and waiting for 12months can further reduce the tax rate for crypto assets as per long-termcapital gain rates.
Let's say you expect to earn less than usualthis year due to a job loss or sabbatical.
Selling crypto assets in alow-income year can result in a lower tax rate, and waiting for more than ayear to sell can further reduce the tax rate for crypto assets.
According to section194S of the Income Tax Act 1961, a 1% TDS is levied on any considerationpaid for transferring Virtual Digital Assets. Essentially, when you sell Cryptoon a crypto exchange, the exchange must deduct and withhold 1% of thetransaction value as TDS, which is then paid to the government.
For instance, if you sell Bitcoin worth₹20,000, the 1% TDS would be deducted from the sale amount, which amounts toapproximately ₹200 in this example.
The crypto exchange will directly deductthis amount from your balance.
It's important to note that in the case ofcrypto-to-crypto trades, TDS will be applied to both the buyer and seller at arate of 1%.
In addition to taxes on profits, you mayhave to pay income tax if you engage in the following activities:
In India, taxpayers can choose between theold tax regime and the new regime, which has lower tax rates. However, someexemptions and deductions available in the old regime are not applicable in thenew regime.
Assuming you choose the new tax regime, youwill be taxed on your total income at rates ranging from 0% to 30%.
India has aprogressive tax rate system, meaning different tax rates apply to different taxslabs. You need to calculate the applicable tax rate only for the amount thatfalls into each tax slab, rather than applying the same rate to your entireincome.
For the Assessment Year 2026-27 (F.Y 2025 –26), the personal income tax rates for the new tax regime are as follows:
This regime has lower rates but disallowsmost deductions:
You can choose between the two regimesdepending on your income and eligible deductions when filing your return.
Calculating your crypto income is a prettystraightforward process; all you need to do is add all your gains together,giving you your taxable income base.
Wondering if there are non-taxableactivities in India? Yes, there are a few instances where you don’t have to payany taxes in India. Let’s have a look at these events.
The following activities are taxable eventsin India. You have to pay taxes if you get involved in any of these activities.
The ITD still needs to specify how theywill tax rewards received from crypto mining. Neither have there been any priorstatements or guidance on this matter.
This creates uncertainty on how theIndian government or ITD intends to tax crypto mining rewards.
Until official guidance is provided, it isreasonable to anticipate that mining rewards in India will be taxed as regularincome upon receipt.
This implies being subject to progressive income tax ratesinstead of a flat 30% rate. Moreover, if you later sell, swap, or use the minedcoins and generate a profit, you may be liable for a 30% tax on that profit.
The ITD has not provided specificguidelines on taxing staking rewards in India.
However, assuming that gainsfrom staking in a Proof-of-Stake (POS) consensus mechanism will be treated asincome and the received assets taxed upon receipt is reasonable.
These assets will be taxed based on theirfair market value (FMV) at the time of receipt.
Additionally, a 30% tax mayapply when you choose to dispose of these tokens in the future.
The ITD has not provided any definitiveinstructions on the taxation of crypto margin trading, futures, and CFDs. Wewill revise and supplement this guide as soon as the ITD releases an officialguideline.
Let's delve into the tax implications ofNFTs under the new tax laws. NFTs, categorized as Virtual Digital Assets, aresubject to taxation in India. If you profit from the sale of an NFT, you willbe liable for taxes, surcharges, and cess. Minting NFTs is not currentlyspecified as a taxable event by the ITD.
However, if you sell or exchange an NFT forfiat currency or cryptocurrency, a flat 30% tax may apply based on taxationmodels similar to India.
Gifting Crypto in India is a taxable event.However, there are a few exceptions:
To qualify for a tax deduction on donationsto charitable institutions in India, it is necessary to donate through officialbanking channels or in cash up to RS2,000. Since cryptocurrencies are notrecognized as legal tender in India, any donations made in Crypto will not beeligible for tax deductions.
However, your generous contribution in the form ofcryptocurrency may be considered as the disposal of an asset, potentiallysubjecting any perceived profits to a 30% tax.
The ITD has yet to issue any detailedguidance on DeFi transactions. Therefore, we must rely on the existingprovisions of the Income Tax Act for direction. You may be taxed at your TaxRate for the following DeFi transactions:
Even though you have paid tax upon receipt,it is essential to remember that you may still be liable for a 30% tax on anyprofits made if you sell, swap, or spend those tokens later.
The ITD is yet to release any guidance onhow income from ICOs is taxed. ICOs are special events that allow investors toown project native tokens before the project's release. They are similar toIPOs; you can trade mainstream tokens like BTC and ETH to receiveproject-native tokens in exchange.
Since all income is taxed under the umbrellatax rate of 30%, income from ICOs will most likely be taxed under the samerate.
However, we suggest seeking guidance froman experienced tax professional regarding the taxation of such tokens to avoidlegal complications in the future.
The taxation of income from DAOs in Indiacurrently needs more clear guidance. We are actively monitoring for any newguidelines on this matter. We will update this information as soon as relevantdetails emerge to provide you with the latest insights.
Regarding hard forks, receiving new tokensresulting from a fork will be subjected to Income Tax at an individual rate.The tax rate will be based on the fair market value of the tokens in INR at thetime of receipt. Additionally, if you later decide to sell, swap, or spend yourtokens, you'll have to pay a 30% tax on any profit made from the transaction.
On the other hand, airdrops are considereda gift, and you may be able to claim tax exemption if the total value ofairdrops and gifts is up to INR 50,000 in a year. However, if the value exceedsINR 50,000, you'll have to pay Income Tax at your rate based on the fair marketvalue of the token received at the time of receipt.
There are two significant periods in Indiawhen filing your crypto taxes. The first is the financial year (FY), whichaligns with the fiscal year that runs from April 1 to March 31 of the followingyear. The second is the assessment year (AY), the period during which you'rerequired to report and pay your taxes for the previous financial year.
For example, the most recent financial yeartook place between April 1, 2025, and March 31, 2026, commonly referred to asFY 2024-25. Similarly, the current assessment year for the previous financialyear is often known as AY 2026-27.
If you're reporting your crypto taxes aspart of the AY 2026-27, the tax deadline is July 31st, 2026. However, if you'reunder a tax audit for the previous FY, the deadline is pushed back to October31st, 2026. It's crucial to keep track of these deadlines and file your taxeson time to avoid penalties and interest charges.
Filing crypto taxes in India can be acomplex process, especially if you are unfamiliar with tax laws andregulations.
In India, you have two options to filecrypto tax - ITR-2 for reporting capital gain tax and ITR-3 for reportingbusiness income tax. So we’re providing you with a detailed process to reportcrypto taxes on both options.
Step 1: Gatherall the necessary documents related to your crypto transactions, such as thepurchase and sale receipts, crypto wallet details, and other transactionrecords. Also, calculate all your crypto gains and incomes.
Step 2: In ITR-2,under the ‘Capital Gains’ section, enter the details of your cryptotransactions, including the purchase and sale date, the type of Crypto, thequantity, the purchase price, and the sale price. And finally, enter capitalgains in the appropriate fields.
Step 3: Ifyou are reporting your crypto income as business income, use ITR-3,and enter the details of your business income in the ‘Profit and Loss’ section.Ensure to include all the expenses related to your crypto transactions, such asexchange fees, transaction fees, and other expenses.
Step 4: Onceyou have entered all the necessary information, calculate your tax liabilityand pay any taxes due. You can pay your taxes online through the Income TaxDepartment’s website or by visiting your bank branch.
Step 5: Finally,file your income tax return online through the Income Tax Department’s website.Save a copy of your tax return and all the supporting documents for futurereference.
It is always recommended to seekprofessional help from a tax consultant or a CA or use an online crypto taxportal like Kryptos ifyou are unsure about any steps in filing your crypto taxes.
Now that you’re aware of how your cryptotransactions are taxed and what forms you need to fill out to complete your taxreport, here’s a step-wise breakdown of how Kryptos can make this task easierfor you:
If you need clarification regarding theintegrations or generating your tax reports, you refer to our video guide here.
The ITD, like many tax authoritiesworldwide, requires you to maintain detailed records from past years. You areexpected to keep the following records in India:
1. Is Crypto legal in India?
Yes, Crypto is legal in India and isconsidered a "Virtual Digital Asset (VAD)" rather than a currency bythe IITD. As such, Crypto is subject to taxation following specific guidelinesissued by ITD, which include different tax rules and regulations.
2. How to Calculate and File Your CryptoTaxes in India Using Kryptos?
Filing your crypto taxes alone can bedifficult, and it's important to ensure you don't miss reporting anytransactions that could lead to legal trouble. Kryptos offers a smartsoftware-based solution for crypto taxation. It can quickly generate a legallycompliant tax report by auto-fetching your transactions. This means you canrelax on your couch while Kryptos takes care of everything.
3. How is receiving Crypto as a gift taxin India?
To determine whether you need to pay tax ongifted Crypto, two primary factors come into play: the value of the gift andyour relationship with the person who gave it to you.
Any gifts received in the same tax yearvalued below ₹ 50,000 are tax-free in India. However, gifts valued above thislimit are taxed based on your ordinary income tax rates, up to 30%. But, it'sunclear whether crypto gifts are taxed as ordinary income or according to the30% flat income tax rate.
A gift from a direct family member, likeyour parents or grandparents, is considered tax-free, regardless of the value.Although there is no specific mention of crypto gifts by the ITD guidelines,it's reasonable to assume that the tax-free gift law applies to Crypto as well,as it stands today.
4. How is Staking Taxed in India?
The ITD has not provided any guidelines onthe tax consequences of staking rewards. However, suppose you are engaging instaking as a participant in a PoS consensus mechanism. In that case, you willprobably be required to pay Income Tax at your tax rate on the fair marketvalue of the received tokens in INR on the day of receipt. Furthermore, you'llbe accountable for a 30% tax on any earnings realized when you eventually sell,swap, or use your staking rewards.
All content on Kryptos serves generalinformational purposes only. It's not intended to replace any professionaladvice from licensed accountants, attorneys, or certified financial and taxprofessionals. The information is completed to the best of our knowledge and weat Kryptos do not claim either correctness or accuracy of the same. Beforetaking any tax position/stance, you should always consider seeking independentlegal, financial, taxation or other advice from professionals. Kryptos is notliable for any loss caused by the use of, or by placing reliance on, theinformation on this website. Kryptos disclaims any responsibility for theaccuracy or adequacy of any positions taken by you in your tax returns. Thankyou for being part of our community, and we're excited to continue guiding youon your crypto journey!
