ITR filing for crypto traders in India

India's crypto tax regime, since the 2022 Union Budget, treats Virtual Digital Assets (VDAs) as a distinct asset class with its own rules. The rules are simple in concept and unforgiving in detail. Filing ITR cleanly when crypto is involved requires understanding both halves.

The headline rules

• 30% flat tax on gains from transfer of VDAs (income-tax computation, with cess and surcharge on top).
• No deduction for any expense other than cost of acquisition.
• No set-off of losses from VDA against any other income — including against other VDA losses.
• No carry-forward of VDA losses.
• 1% TDS on the transfer value, deducted by the exchange or buyer (Section 194S).

Which ITR form

Crypto income from trading is reported as 'Income from Other Sources' or as 'Income from Capital Gains' under Schedule VDA, depending on the nature of activity. Salaried filers who also traded crypto usually file ITR-2. Business or professional traders file ITR-3. The Schedule VDA section has to be filled in for every transfer, with separate rows per acquisition and disposal.

Where filers get it wrong

• Trying to set off crypto losses against salary or business income — not permitted.
• Netting losses across multiple crypto holdings — not permitted; each VDA is computed independently.
• Forgetting to claim 1% TDS already deducted by exchanges. The TDS is creditable against the 30% liability.
• Underreporting transfers from peer-to-peer or off-exchange transactions where no TDS was deducted at source.
• Failing to maintain a transaction log with acquisition cost — the burden of proof is on the taxpayer.

The clean filing process

1. 1Pull a full year's transaction log from every exchange and self-custody wallet used.
2. 2Compute gains and losses per VDA, per transfer.
3. 3Total the gain figure across the year — no netting across VDAs.
4. 4Apply 30% tax plus applicable cess and surcharge.
5. 5Claim TDS credits where deducted at source.
6. 6File ITR-2 or ITR-3 with Schedule VDA completed.

The regime penalizes lossy years harshly — no offset, no carry-forward. Plan disposal timing within a fiscal year with that in mind.