The Income Tax Department has started sending notices to individuals who traded or invested in cryptocurrencies but didn’t report their income. | Image: Unsplash
If you’re trading, investing, or earning through cryptocurrencies in India, it’s important to understand how crypto taxation works.
According to the Indian tax laws, any income earned from the transfer of cryptocurrencies is taxed at a flat rate of 30% under Section 115BBH of the Income Tax Act.
This tax applies regardless of how long the crypto assets were held. No deductions are allowed except for the cost of acquisition, and losses from crypto trades cannot be set off against other income or carried forward to future years.
In addition to the 30% tax, a 1% Tax Deducted at Source (TDS) is also applied on crypto transactions exceeding Rs 50,000 in a financial year — or Rs 10,000 in some cases.
This rule applies to all forms of transfers, including trading, selling, or spending crypto. If more TDS has been deducted than what you owe as total tax, you can claim a refund while filing your Income Tax Return (ITR).
Cryptocurrencies earned through mining, staking, or even received as salary are also taxable. Depending on the nature of the activity, this income is taxed under either “Income from Business” or “Income from Other Sources.”
Likewise, NFTs (Non-Fungible Tokens) are treated like any other crypto asset and taxed at the same 30% rate, along with 1% TDS on larger transactions.
Even gifts and donations in crypto can be taxed. If the value of crypto received as a gift exceeds Rs 50,000 in a financial year (except from close relatives or on specific occasions), it’s treated as taxable income for the recipient.
Donations made in crypto may also be considered a taxable transfer.
Also Read: Missed Your EMI? Here’s How It Can Wreck Your Credit and More
According to agency reports, the Income Tax Department has sent notices to thousands of individuals who conducted crypto transactions but failed to report the income in their tax returns for assessment years 2023-24 and 2024-25.
The department believes some high-risk individuals may be using unaccounted income to invest in digital assets and potentially evade taxes.
These notices are part of the department’s NUDGE initiative, aimed at encouraging voluntary compliance without aggressive enforcement.
Using data analytics and information from crypto exchanges, the department is identifying people who either under-reported or misreported their crypto income. Many have been advised to file updated ITRs to correct these discrepancies.
