Cryptocurrency and VDA Taxation Under ITA 2025: Complete Advanced Guide

Cryptocurrency and VDA Taxation explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

1. VDA Taxation: The Complete Framework

Finance Act 2022 introduced a comprehensive Virtual Digital Asset (VDA) taxation framework in India — incorporated in ITA 2025. The framework is deliberately stringent: 30% flat tax, no deductions, no set-off, no carry-forward. This signals the government intent to allow crypto but tax it heavily to prevent it from being used for tax arbitrage.

2. VDA Definition: What Is Covered

Under Section 2(47A) equivalent of ITA 2025, VDA means:

• Any information, code, number, or token (not Indian currency or foreign currency) generated through cryptographic means or otherwise, with store of value and exchange functions
• NFTs: Non-fungible tokens
• Any other digital asset as the government may notify
• EXCLUDES: Indian rupee, foreign currencies, financial instruments covered under other laws (equity shares, mutual funds etc.)

3. The 30% Flat Tax: No Exceptions

Every rupee of VDA income is taxed at 30%:

• No basic exemption applies to VDA income
• Section 157 rebate (zero tax up to Rs 12L) does NOT apply to VDA income
• No LTCG/STCG distinction — same 30% rate regardless of holding period
• No indexation benefit
• Only cost of acquisition is deductible — no other expense (not gas fees, not exchange fees)
• No set-off of VDA loss against VDA gain from another VDA
• No carry-forward of VDA losses

4. What Triggers VDA Tax

Tax arises on any "transfer" of VDA — broadly defined:

• Sale for Indian Rupees (most common)
• Crypto-to-crypto swap (exchange — treated as sale of first VDA at FMV)
• NFT minting and sale
• NFT transfer
• Staking rewards (taxable at FMV when received)
• Mining income (taxable at FMV when mined)
• Airdrop receipt (taxable at FMV on receipt date)
• Crypto used to pay for goods/services (treated as sale at FMV)
• Liquidity pool tokens (may trigger on provision/withdrawal — evolving position)

5. TDS Under Section 67B: How It Works

1% TDS is deducted by the exchange or buyer on every VDA transfer:

• Threshold: Rs 10,000 per financial year aggregate transactions (Rs 50,000 for specified persons)
• Exchange platform deducts TDS when user sells or transfers on the platform
• For P2P trades: buyer is responsible for deducting 1% TDS from consideration
• TDS is on the full sale consideration — not the gain
• TDS appears in the seller Form 26AS as credit
• Example: sell Bitcoin worth Rs 5 lakh; TDS = Rs 5,000 (1%); gain = Rs 1 lakh; tax at 30% = Rs 30,000; credit Rs 5,000 TDS; pay Rs 25,000 balance

6. Crypto Gifting

When VDA is gifted:

• Sender: not taxable on the gift itself (no capital gains on gifting — but no deduction either)
• Recipient: if gift from non-relative and total gifts exceed Rs 50,000 in year, the FMV of VDA on the date of receipt is taxable as Other Sources income at slab rate
• On subsequent sale by recipient: VDA tax at 30% on (sale price minus FMV at receipt — the earlier Other Sources income amount)
• Gift from relative: exempt from Other Sources tax but still taxed at 30% when sold

7. International VDA Transactions

VDA held on foreign exchanges or self-custody wallets:

• Must be disclosed in Schedule FA (foreign assets) if resident Indian
• Income from sale of VDA on foreign exchange is still taxable in India at 30%
• No TDS on foreign exchange transactions — resident must pay advance tax
• FEMA: buying VDA using remitted foreign exchange counts towards LRS limit ($250K/year)
• PMLA (Prevention of Money Laundering Act): VDA service providers are reporting entities — transactions reported to FIU

8. Reporting in ITR

Schedule VDA (introduced in ITR-2 and ITR-3 from AY 2023-24) requires:

• Each VDA category separately: Bitcoin, Ethereum, NFT, other
• For each: date of acquisition, cost, date of transfer, consideration, gain
• Aggregate gains: total VDA income taxed at 30%
• TDS credits claimed in Schedule TDS
• Foreign VDA: also reported in Schedule FA

9. Why TaxClue

Active crypto traders with dozens of transactions across multiple exchanges need systematic record-keeping and accurate Schedule VDA filing. TaxClue compiles exchange statements, computes VDA income, and files ITR accurately. Contact us under ITA 2025.

Getting Cryptocurrency and VDA Taxation right the first time saves both time and money. Many businesses seek expert help for Cryptocurrency and VDA Taxation to stay fully compliant. The rules around Cryptocurrency and VDA Taxation are updated from time to time, so stay informed.