How to Disclose Gains from Crypto Assets in AY 2025-26
- Rajesh Kumar Kar
- Jul 24
- 8 min read
Cryptocurrency taxation in India has become a critical issue for both investors and tax professionals, particularly as the government continues to refine its policies surrounding digital assets. With the growing popularity of crypto investments, the need for proper tax compliance has never been more essential. For the Assessment Year (AY) 2025-26, the Indian government has made certain changes in how crypto transactions are taxed, and it’s important for individuals to understand these regulations to ensure accurate filing of their Income Tax Returns (ITR). Let us explore the key aspects of crypto taxation in India, the proper way to disclose crypto gains in your ITR, and the consequences of missing these disclosures. Additionally, we’ll cover recent updates in crypto taxation and guide you on staying compliant with the evolving tax landscape.
Table of Contents
Understanding Crypto Taxation in India (AY 2025-26)
For AY 2025-26, the taxation of cryptocurrencies in India is governed by the provisions laid out in the Income Tax Act, with some key updates that investors should be aware of. Cryptocurrencies are treated as "virtual digital assets" under Indian tax laws. Income arising from the sale, transfer, or exchange of digital assets, including Bitcoin, Ethereum, and others, is subject to tax. The tax treatment can be categorized into two primary heads:
Capital Gains Tax: If you hold cryptocurrency as a capital asset and sell it for profit, the gains will be subject to capital gains tax. If the holding period is more than 36 months, it will be treated as long-term capital gains (LTCG), and if it is less than 36 months, it will be classified as short-term capital gains (STCG). Long-term gains are typically taxed at a lower rate than short-term gains.
Income Tax on Business Profits: If you are actively trading in crypto or mining digital assets, the income is considered as business income and will be taxed according to the applicable business tax rates. The profits will be treated as a part of your business income and taxed accordingly.
The government has also introduced provisions to deduct a specific percentage of tax at source (TDS) on crypto transactions, making it easier to track transactions. These TDS provisions ensure that taxes are deducted upfront on crypto gains exceeding a certain threshold, making compliance easier for investors and tax authorities.
How to Disclose Crypto Gains in Your ITR (AY 2025-26)
When filing your ITR for AY 2025-26, it is crucial to properly disclose your cryptocurrency gains to avoid penalties and interest charges. The process of reporting crypto gains in your ITR is relatively straightforward, but there are specific steps that need to be followed:
Report Income from Crypto Transactions: If you have sold or transferred cryptocurrency during the financial year, you must report the income under the “Capital Gains” section of your ITR form if it's classified as such. For business income, report it under the "Business and Profession" section.
Calculate Gains or Losses: You need to calculate your gains or losses based on the sale price and the acquisition cost. If you hold the cryptocurrency for more than 36 months, long-term capital gains tax will apply. If held for less than 36 months, short-term capital gains tax will apply. Ensure to maintain records of your purchase and sale prices, including transaction fees and other costs.
Fill in the Correct ITR Form: Depending on your source of income from crypto, you’ll need to use the appropriate ITR form. For individuals with crypto income as capital gains, you will likely use ITR-2, while those with business income should use ITR-3.
TDS Compliance: Ensure that any tax deducted at source (TDS) on crypto transactions has been properly accounted for in your ITR. If you have received cryptocurrency-related income from exchanges or platforms that have deducted TDS, ensure that the TDS amount is reflected in your total tax liability.
Declare Crypto Losses: If you have incurred losses from cryptocurrency transactions, you are allowed to offset these losses against other capital gains in the same financial year. Make sure to report these losses accurately to reduce your tax liability.
Keep Track of All Transactions: Maintain detailed records of all your crypto transactions, including the date of purchase, sale, the amount involved, and the profit or loss made. This will help you during tax filing and in case the tax authorities require more details.
What if You Missed Reporting Crypto Gains?
Failure to report crypto gains or losses can have significant consequences, as the Indian tax authorities take non-compliance seriously. If you missed reporting crypto gains or any part of your crypto income in the previous tax return, you still have options to rectify the situation:
File a Revised Return: If you discover that you missed reporting your crypto income after filing your return, you can file a revised return before the end of the assessment year. The revised return will allow you to amend your original return and report any unreported income.
Penalties for Non-Disclosure: If you fail to disclose crypto gains and the tax authorities discover the omission during an audit or scrutiny, you may face penalties. The penalty for underreporting income can range from 50% to 200% of the tax evaded. Additionally, interest under Sections 234A, 234B, and 234C can be levied on the unpaid tax amount.
Dispute Resolution: In case of serious non-disclosure or errors in reporting crypto gains, taxpayers can seek redress through the dispute resolution mechanism provided by the Income Tax Department. It is always advisable to consult a tax professional to avoid legal complications.
Recent News & Updates
The taxation framework surrounding cryptocurrencies in India has been evolving rapidly. In recent developments, the Indian government has introduced a new 1% TDS (Tax Deducted at Source) on crypto transactions, effective from FY 2024-25. This new provision mandates platforms to deduct tax at the point of transaction, simplifying the process of tracking crypto income. The TDS will be applicable on transactions exceeding a specified threshold, making it easier for the tax authorities to monitor and collect tax on crypto-related activities.
Furthermore, the Finance Minister has indicated that the government is closely monitoring the cryptocurrency space to address concerns over money laundering, illegal activities, and investor protection. These moves suggest that more regulatory clarity is on the way, which may affect future tax policies related to digital assets.
Conclusion
With the rise of cryptocurrencies, it is crucial for investors to understand the tax implications of their crypto activities and ensure proper disclosure in their Income Tax Returns. For AY 2025-26, crypto gains must be reported accurately to avoid penalties and ensure compliance with the updated tax framework. The introduction of TDS and the revised reporting guidelines make it easier to track and pay taxes on crypto income. If you’ve missed reporting your crypto gains, it’s essential to file a revised return to rectify the mistake. Staying updated with the latest tax regulations and seeking professional advice is vital for effective tax planning and compliance. For anyone looking for assistance in filing their taxes, it is highly recommended to download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience.
Frequently Asked Question (FAQs)
Q1: Do I need to report all types of cryptocurrency income in my ITR?
Yes, it is essential to report all types of cryptocurrency income in your Income Tax Return (ITR). This includes capital gains from the sale or exchange of cryptocurrencies, mining income, income from staking, airdrops, and any earnings from trading. Regardless of the type, cryptocurrency income is taxable and must be reported accurately. Failing to disclose crypto income can result in penalties, interest, or even legal consequences, so it is important to maintain transparency in your tax filings.
Q2: What is the deadline for reporting crypto income in the ITR?
The deadline for filing your ITR for the Financial Year 2024-25 (Assessment Year 2025-26) is September 15, 2025, for individuals and non-audit assessees. For businesses or taxpayers requiring an audit, the deadline is later. It's important to ensure that all types of income, including crypto earnings, are reported by the filing date to avoid penalties and interest.
Q3: What happens if I miss reporting my crypto gains in my ITR?
If you miss reporting your cryptocurrency gains, you have the option to file a revised return before the end of the assessment year. However, failing to report crypto gains accurately or on time can lead to penalties, interest on unpaid taxes, and increased scrutiny from tax authorities. To avoid these issues, it is crucial to ensure full disclosure of all your crypto-related income when filing your taxes.
Q4: Do I need to file a separate form for crypto income in my ITR?
No, you do not need to file a separate form specifically for crypto income. Cryptocurrency income is reported within the relevant sections of your standard ITR form. You must accurately report capital gains under the "Capital Gains" section, or income from other sources if you are earning from crypto activities such as mining, staking, or airdrops. Ensure that the nature of the income is correctly categorized to avoid errors and discrepancies.
Q5: How can I track my crypto income and calculate taxes on it?
Tracking your crypto income is crucial for accurate tax filing. You can maintain detailed records of all your cryptocurrency transactions, including the purchase and sale dates, transaction amounts, and transaction fees. Most cryptocurrency exchanges provide statements or summaries that can assist in calculating your capital gains or losses. By tracking each transaction carefully, you can ensure that you report the correct information for tax purposes. It's advisable to use tools that automate this process, simplifying tax calculations.
Q6: Is TaxBuddy capable of assisting with cryptocurrency tax filing?
Yes, TaxBuddy offers assistance with cryptocurrency tax filing. The platform helps you accurately report your cryptocurrency transactions, ensuring compliance with the latest tax laws and regulations. Whether you're dealing with capital gains or mining income, TaxBuddy’s easy-to-use tools and expert guidance can simplify the process, making it easier to file your taxes and avoid penalties.
Q7: What are the penalties for failing to report crypto gains?
Failing to report cryptocurrency gains can lead to significant penalties, including fines, interest on unpaid taxes, and potential scrutiny from tax authorities. The penalties can vary depending on the severity of the omission, but they often involve additional financial costs and complications. Reporting your crypto earnings accurately and on time will help you avoid these penalties and ensure that your tax filings are compliant with regulations.
Q8: How do I calculate capital gains on my crypto investments?
Capital gains on cryptocurrency are calculated by subtracting the acquisition cost (purchase price plus any transaction fees) from the sale proceeds (sale price). If you have held the cryptocurrency for more than 36 months, it qualifies as long-term capital gains, which may be taxed at a lower rate. If held for less than 36 months, it is considered short-term capital gains, and the tax rate will be higher. Ensure you properly categorize the holding period to calculate the correct tax rate.
Q9: Are cryptocurrency exchanges required to provide tax statements for my crypto transactions?
Many cryptocurrency exchanges do provide annual tax statements or trade summaries that detail your trading activities, such as the total value of crypto bought and sold and the gains or losses. However, these reports may not always be comprehensive, and it is important to cross-check them with your transaction records to ensure they match. Keeping accurate records is crucial, and using a platform like TaxBuddy can help reconcile these statements with your tax filing.
Q10: Can I claim losses from crypto trading to offset gains?
Yes, you can set off losses from crypto trading against capital gains from other investments, which can help reduce your overall taxable income. For instance, if you made a profit on other investments but incurred losses from crypto trading, you can offset those losses against the capital gains from your other assets. This strategy helps lower your tax liability and should be correctly reported under the "Capital Gains" section in your ITR.
Q11: What documents do I need to file for crypto income?
To file taxes on crypto income, you will need to provide records of your crypto transactions, including buying and selling dates, amounts, and any transaction fees paid. You should also include exchange statements or tax reports provided by your crypto exchange, which summarize your trading activity. Accurate documentation is crucial for calculating capital gains and ensuring compliance with tax regulations.
Q12: How can I stay updated on changes to cryptocurrency tax laws?
To stay updated on changes to cryptocurrency tax laws, it is important to regularly follow announcements from the Income Tax Department, financial news outlets, and trusted tax professionals. TaxBuddy also provides timely updates on regulatory changes, helping you stay compliant with evolving tax laws. By staying informed, you can ensure that your tax filings reflect the latest requirements and avoid penalties for non-compliance.
