🪙 Indian Taxation on Cryptocurrency: A Comprehensive Guide for 2025
Author: CA Pankaj Agrawal
Firm: M/s Pankaj Agrawal & Associates, Chartered Accountants, Indore
Updated as on: May 2025
📌 Introduction
The rapid adoption of cryptocurrency in India—from Bitcoin to Ethereum and beyond—has ushered in both excitement and confusion, especially on the taxation front. With the advent of digital assets and the Government of India taking concrete steps to regulate them, it is crucial for taxpayers, investors, and professionals to understand how crypto transactions are taxed under Indian Income Tax Law and GST regime.
🔍 What is Cryptocurrency?
As per the Finance Act, 2022, cryptocurrencies fall under the umbrella term “Virtual Digital Assets (VDAs)“. Section 2(47A) of the Income Tax Act defines VDAs to include:
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Cryptocurrencies (e.g., Bitcoin, Ethereum)
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Non-fungible Tokens (NFTs)
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Any other digital asset as notified by the Government
💰 Income Tax on Cryptocurrency: Key Provisions
✅ Section 115BBH – Flat Tax Rate of 30%
The Finance Act, 2022 introduced Section 115BBH, which lays down the taxation framework for income from transfer of VDAs.
| Particulars | Details |
|---|---|
| Tax Rate | Flat 30% (plus surcharge and cess) |
| No Deductions Allowed | Except cost of acquisition |
| Loss Set-off | No set-off of losses from other heads or carry forward |
| Gift of Crypto | Taxable in the hands of recipient under Section 56(2)(x) |
Example:
If you purchase 1 Bitcoin for ₹15,00,000 and sell it for ₹20,00,000, your taxable gain is ₹5,00,000. Tax payable will be:
₹5,00,000 × 30% = ₹1,50,000 + surcharge + cess
📊 TDS on Crypto Transactions – Section 194S
From 1st July 2022, TDS at 1% is applicable on transfer of crypto assets under Section 194S if the total transaction exceeds:
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₹10,000 for regular taxpayers
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₹50,000 for specified persons (individuals/HUFs with no business income or turnover < ₹1 crore)
This TDS is applicable on gross sale value, not on the gain.
🧾 GST Implications on Cryptocurrency
The GST framework around crypto is evolving, but currently:
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Mining of crypto may attract GST if done commercially.
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Crypto exchanges providing services may be liable for 18% GST under “Online Information Database Access and Retrieval (OIDAR)” services.
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If cryptocurrencies are used as payment for goods/services, the transaction might be taxed as barter.
⚠️ Note: There is no explicit GST classification for cryptocurrencies yet. Practitioners must take a cautious, case-by-case approach.
📈 Accounting & Audit Considerations
Under Indian Accounting Standards (Ind AS):
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Cryptocurrencies may be accounted as intangible assets (Ind AS 38) or inventory, based on the nature of holding.
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Disclosure in the Notes to Accounts is highly recommended.
Audit Points:
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Verify ownership, valuation methodology, and fair disclosure
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Report unusual or large VDA transactions in CARO reporting (for applicable companies)
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Ensure proper TDS compliance under Section 194S
🧠 Practical Insights & Recommendations
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Keep Comprehensive Records – Maintain detailed logs of wallet addresses, transactions, exchanges used, and tax calculations.
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Consult a Chartered Accountant – Given the complex nature of crypto taxation, expert consultation is vital.
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Avoid Peer-to-Peer Grey Markets – These may not comply with tax/TDS norms, exposing investors to legal risks.
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Timely Filing of Returns – Always report crypto gains and comply with Form 26AS and AIS reconciliation.
🔮 The Road Ahead
While the Indian Government has not yet legalised or banned cryptocurrencies, the intent is to regulate the sector with proper taxation and traceability. As we await a dedicated Crypto Regulatory Framework, compliance with the current income tax and GST provisions is non-negotiable.
📞 Need Expert Crypto Tax Advice?
At M/s Pankaj Agrawal & Associates, we specialize in taxation, audit, and regulatory compliance for emerging sectors like Virtual Digital Assets.
📍88, Jawahar Nagar, Near Rajendra Nagar, Indore (MP)
📞 +91 7999028234
📧 Pankajagrawal0116@gmail.com
#CAPankajAgrawal #IndoreCharteredAccountant #TaxExpertIndia #AccountingProfessionals #CryptoTaxExperts #CAIndore #MPCAs #TrustedTaxAdvisor #IndianTaxExperts #PANAndGSTExperts
