Bitcoin Tax Rules in India: New Record High for Bitcoin, But Tax Norms Remain Strict – How to Report Crypto Gains in ITR

As Bitcoin hits an all-time high, investors in India need to be cautious. While profits may soar, India’s tax laws on crypto assets are among the strictest globally. Even a small mistake in your Income Tax Return (ITR) can lead to heavy penalties or legal action.

🔥 Bitcoin at Record High, But India’s Tax Grip Tightens

This week, Bitcoin surged to $112,694 (₹96.6 lakh approx) — its highest value ever. Since July 2024, the cryptocurrency has gained more than 90%, making it a goldmine for many investors.

But in India, cryptocurrencies like Bitcoin are not officially recognized as legal investment assets, and yet they are fully taxable under the Income Tax Act.

💸 Tax on Bitcoin Gains: Flat 30% Under Section 115BBH

Since FY 2022-23, any gains from Bitcoin or other Virtual Digital Assets (VDAs) are taxed as follows:

• Flat 30% income tax on profits

• No deductions allowed (even for transaction fees or other expenses)

• No set-off against any other income (like salary or business losses)

• No carry-forward of crypto losses to future years

Example:

• Purchase Price: ₹6,00,000

• Sale Price: ₹10,50,000

• Profit: ₹4,50,000

• Tax @ 30%: ₹1,35,000 (to be paid even if other incomes are in loss)

🎁 Tax on Gifted or Discounted Bitcoins

Gifts or heavily discounted crypto purchases are also taxable:

• Gifted Bitcoin worth over ₹50,000: Entire value is taxable as income.

• Bought at lower-than-market price: The difference is taxed as VDA income.

Example:

• Market Value: ₹1.9 lakh

• Purchase Price: ₹1 lakh

• Taxable Income: ₹90,000

• Tax: ₹27,000

📄 Reporting in ITR: Use Schedule VDA

To avoid penalties, all crypto transactions must be disclosed in the correct section of the ITR:

• Schedule VDA: For domestic crypto transactions

  • Include: Date of purchase, date of sale, cost, sale price, gain/loss

• Schedule FA (Foreign Assets): If crypto is held on foreign exchanges or wallets

🔔 Non-reporting can lead to penalties, prosecution, or even jail.

🧾 TDS on Crypto: 1% Mandatory

Since July 2022, 1% TDS under Section 194S applies on every crypto transaction.

• If you’re selling crypto on Indian exchanges like WazirX or CoinDCX, TDS is usually auto-deducted.

• But if using foreign wallets or peer-to-peer transfers, you must deposit TDS yourself.

Failure to deduct or pay TDS can attract penalties and prosecution under Income Tax law.

✅ Key Takeaways

• All gains from Bitcoin are taxable at 30%, plus applicable surcharge and cess.

• There are no exemptions, even for long-term holdings.

• Use Schedule VDA in ITR to report each transaction in detail.

• Disclose foreign wallets/exchanges under Schedule FA.

• Ensure TDS is paid or deducted to avoid legal trouble.

As Bitcoin continues its bull run, Indian investors must tread carefully. Enjoy the gains, but don’t forget the taxman is watching.

Pro tip: Maintain clear records of all your crypto transactions. Use ITR-2 or ITR-3 if you have crypto income. Consult a tax expert for complex scenarios.