In 2022, the Indian parliament passed new tax rules that are not friendly to crypto. Below, we outline the changes affecting how you file your crypto taxes in India. 

How is cryptocurrency taxed in India? 

The new law passed by the Indian government taxes crypto earnings at 30%. This includes not only capital gains but also income from crypto mining. It is the same rate applied to gambling winnings. 

What is the tax deduction at source (TDS)?  

The 30% tax includes a 1% tax deduction at source (TDS) that went into effect in July 2022.^[1]This is a sum that is deducted at the time of purchase; centralized exchanges (CEX) are responsible for making this deduction, but it is unclear how this rule would be enforced for decentralized exchanges (DEX). Investors will receive a tax refund if the sum of their TDS is more than their entire tax liability.

Crypto advocates have vehemently opposed the TDS, saying it will stifle the crypto industry in India and cause accounting nightmares. For example, in the Economic Times, crypto advisor Anoush Bhasin points out that because pairs trading involves two separate transactions, investors in crypto pairs will be taxed twice: 1% on each asset.^[2]

In late June 2022, the Central Board of Direct Taxes (CBDT) clarified that it would be the responsibility of exchanges to deduct the TDS from crypto transactions and pay them to the government within 30 days of the end of the month in which the trade was made. The relevant transaction and payment would be reported on a new form called the 26QE. Additionally, the exchange must provide documentation of the payment to the trader.^[3]

If you make a peer-to-peer crypto swap (i.e., not through a crypto exchange), you will need to obtain a tax deduction account number (TAN) so that the TDS can be applied.

How do I report my crypto taxes in India?  

Individual crypto taxes are reported on Income Tax Return (ITR) 1, 2, 3, or 4, depending on one’s personal circumstances.

The forms’ descriptions from the Income Tax Department are as follows: 

• ITR 1: For resident individuals with income less than Rs.50lakh coming from salaries or wages, one house property, other sources (interest, etc.), and/or agriculture up to Rs.5 thousand.

• ITR 2: For individuals or Hindu Undivided Families (HUFs) who do not have income from operating a business 

• ITR 3: For individuals or HUFs who are operating a business or acting as an individual director in a company

• ITR 4: For resident individuals, HUFs, and non-LLP businesses with salary or wage income less than Rs.50 lakh who also have income from operating a business 

What is the Indian tax deadline? 

The Indian tax year runs from April 1 to March 31, with ITRs usually due on July 31. However, in recent years, there have been glitches with the Indian e-filing system that have pushed the deadline back, so we advise you to keep an eye out for extensions to the deadline.

Learn more about crypto taxes in our crypto tax guide.