How to File ITR for Crypto Income Under Section 115BBH
- Dipali Waghmode
- Nov 3
- 10 min read
Filing an Income Tax Return (ITR) for crypto income under Section 115BBH in India involves specific reporting rules, fixed tax rates, and detailed compliance steps. Income from Virtual Digital Assets (VDAs) like cryptocurrencies and NFTs is taxed at a flat 30% rate, with no deductions or loss set-off permitted. Every crypto transaction must now be reported in the ITR under a dedicated “Schedule VDA,” ensuring transparency and compliance with Income Tax Department guidelines. With updated TDS rules, GST obligations on crypto platforms, and advanced e-filing systems, accurate reporting has become more critical than ever.
To file your crypto income ITR, taxpayers must identify whether their crypto activity qualifies as capital gains or business income, use the correct ITR form (ITR-2 or ITR-3), and ensure that all VDA transactions are recorded in Schedule VDA along with TDS details.
Table of Contents
Understanding Section 115BBH and Its Impact
Section 115BBH was introduced in the Union Budget 2022 to bring clarity and uniformity to the taxation of Virtual Digital Assets (VDAs), including cryptocurrencies and NFTs. It applies to all taxpayers who earn income through the transfer, sale, or exchange of crypto assets. The section imposes a flat 30% tax on profits made from such transactions, regardless of the holding period or nature of activity. In addition, a 4% health and education cess and applicable surcharge are levied on the tax amount.
No deduction is allowed for any expenditure incurred while earning this income, except for the cost of acquisition. Losses from crypto transactions cannot be set off against other income sources, nor can they be carried forward to future years. The purpose of Section 115BBH is to establish a uniform taxation framework for crypto-related income and prevent misuse of unregulated digital transactions.
Tax Rate and Key Provisions for Crypto Income
Crypto income is taxed at a fixed rate of 30% under Section 115BBH, irrespective of the taxpayer’s income slab. The key provisions are as follows:
The tax rate applies to all types of VDAs, including Bitcoin, Ethereum, NFTs, and other digital tokens.
No exemptions, deductions, or allowances are permitted except for the cost of acquisition.
Losses from one VDA cannot be adjusted against gains from another.
Gifts of VDAs are taxable in the hands of the recipient, unless specifically exempt.
A 1% TDS under Section 194S is applicable on crypto transactions exceeding ₹50,000 per financial year (₹10,000 in some cases).
This fixed-rate structure eliminates ambiguity and ensures that all taxpayers report and pay taxes on crypto income uniformly.
How to File ITR for Crypto Income Step-by-Step
Determine the nature of your crypto activity. If you hold crypto as an investment, it falls under ‘Capital Gains’; if you trade frequently, it qualifies as ‘Business Income’.
Choose the correct ITR form. Use ITR-2 for capital gains and ITR-3 for business income.
Compute taxable income. Calculate your profit as Sale Value minus Cost of Acquisition for each crypto transaction.
Include details in Schedule VDA. Enter the transaction date, type of asset, acquisition cost, sale value, and TDS details.
Pay self-assessment tax. After adjusting for TDS, pay any remaining liability through the e-filing portal.
File and verify your return. Submit the ITR before the due date (July 31 for individuals; October 31 for audit cases).
Filing through a guided platform like TaxBuddy ensures that all crypto transactions are properly mapped and verified before submission.
Determining the Nature of Crypto Income
The classification of crypto income depends on how the taxpayer uses digital assets:
Capital Gains: Applicable when cryptocurrencies are held as long-term or short-term investments. The intent is wealth creation rather than active trading.
Business Income: Applicable when trading is frequent, systematic, or forms part of a business activity. The profits are treated as business income and taxed under Section 28 of the Income Tax Act, in addition to Section 115BBH rules.
Understanding this distinction is crucial because it determines which ITR form to file and how transactions are reported.
Reporting Crypto Transactions in Schedule VDA
The Income Tax Department introduced Schedule VDA in ITR-2 and ITR-3 to capture detailed information about crypto-related income. Each transaction must be reported individually with the following details:
Date of acquisition and transfer
Type of digital asset (e.g., Bitcoin, NFT)
Sale consideration and cost of acquisition
Profit or loss on each transaction
TDS deducted under Section 194S
Supporting documents like exchange transaction summaries, VDA gain statements, and TDS certificates should be maintained to substantiate entries. Failure to report transactions in Schedule VDA may lead to tax scrutiny or penalties.
ITR Forms for Crypto Investors and Traders
ITR-2: For taxpayers who earn crypto income as capital gains. This applies to salaried individuals or investors who buy and sell crypto occasionally.
ITR-3: For individuals and professionals engaged in crypto trading as a business activity. Business expenses and other income sources can be declared here, though deductions are still disallowed for crypto gains.
TaxBuddy’s AI-assisted platform automatically detects the correct form and guides users through the ITR filing process, ensuring accurate and compliant reporting under Section 115BBH.
TDS Rules Under Section 194S for Crypto Transactions
Section 194S mandates a 1% TDS on payments made during the transfer of VDAs if the transaction amount exceeds ₹50,000 annually (₹10,000 for specific users like individuals or HUFs not requiring tax audit). The payer—whether an exchange or individual—is responsible for deducting this tax.
TDS serves as a tracking mechanism for crypto transactions. The deducted amount must be deposited with the government and reflected in Form 26AS. When filing ITR, the taxpayer can claim this TDS as a credit against total tax liability. Platforms like TaxBuddy help reconcile TDS records with transaction data to ensure no mismatch occurs during filing.
GST and Compliance Requirements for Crypto Platforms
Since July 2025, all crypto exchanges, wallet providers, and platform operators are subject to 18% GST on services such as trading, deposits, withdrawals, and custody. These entities are treated as “Online Service Providers” and must register for GST regardless of their turnover threshold.
Users are indirectly affected as these platforms may include GST in transaction fees. Proper invoices and tax payments help maintain compliance and avoid regulatory penalties. For traders or businesses dealing in crypto, it is essential to ensure that GST obligations are fulfilled in parallel with income tax requirements.
Common Filing Mistakes and How to Avoid Them
Reporting crypto gains under “Other Sources” instead of Schedule VDA
Missing out on TDS credit under Section 194S
Using incorrect ITR forms (ITR-1 or ITR-4 are not valid for crypto income)
Ignoring GST charges while calculating total taxable income
Failing to maintain transaction records for audit or verification
Avoiding these errors is crucial to prevent scrutiny or penalties. Using tools like TaxBuddy helps automate validation checks and ensures the return is error-free.
Importance of Using TaxBuddy for Accurate Crypto Tax Filing
Filing crypto income manually can be complex due to frequent transactions, multiple wallets, and TDS compliance. TaxBuddy simplifies the process with automated Schedule VDA mapping, AI-based tax calculations, and expert-assisted reviews. The platform ensures that users declare all crypto income, claim eligible TDS credits, and stay updated with the latest tax rules. Whether filing as an investor or trader, TaxBuddy provides a secure, efficient, and compliant way to handle crypto taxation.
Latest Updates from Budget 2025 and CBDT Notifications
The Union Budget 2025 retained the 30% flat tax under Section 115BBH but improved digital filing mechanisms for VDAs. New CBDT notifications introduced refined e-filing processes for Schedule VDA and clarified TDS reporting responsibilities for crypto exchanges. Additionally, crypto platforms registered under GST must now provide quarterly transaction summaries to ensure cross-verification between income tax and GST data. These updates reflect the government’s commitment to tightening compliance while simplifying taxpayer obligations through transparent guidelines.
Conclusion
Filing ITR for crypto income under Section 115BBH requires precise reporting, correct form selection, and adherence to both TDS and GST regulations. With crypto transactions gaining government attention, accurate filing ensures compliance and minimises the risk of scrutiny. Taxpayers can simplify this process through smart platforms designed for digital asset reporting. For anyone looking for assistance in tax filing, it is highly recommended to download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy offers both self-filing and expert-assisted ITR filing options to suit the needs of different taxpayers. The self-filing plan is ideal for those who prefer a do-it-yourself approach with guided prompts and AI-based validation to ensure accuracy. The expert-assisted plan is designed for individuals who want a tax professional to handle their filing end-to-end — from reviewing documents to optimizing tax calculations. Both plans cover complex income sources, including crypto transactions under Section 115BBH, ensuring complete compliance with the latest tax regulations.
Q2. Which is the best site to file ITR?
The best platform for filing ITR is one that combines accuracy, security, and ease of use — and TaxBuddy stands out on all fronts. Unlike basic government utilities, TaxBuddy offers AI-driven accuracy checks, TDS reconciliation, and expert reviews to prevent filing errors. It supports advanced cases such as income from Virtual Digital Assets (VDAs), business income, and multiple sources. Users also benefit from features like pre-filled data import, automatic tax computation, and post-filing support for notices, making TaxBuddy one of the most trusted e-filing platforms in India.
Q3. Where to file an income tax return?
An income tax return can be filed through two primary channels — the official Income Tax Department e-filing portal (www.incometax.gov.in) or an authorized online filing platform such as TaxBuddy. While the government portal provides a free filing option, third-party platforms like TaxBuddy simplify the process with automated data fetching, guided filing steps, and expert verification. For crypto income or multiple income sources, using a professional platform ensures error-free filing and accurate reporting under Schedule VDA as required by Section 115BBH.
Q4. Which ITR form should be used for crypto income?
The correct ITR form depends on the nature of the crypto activity:
ITR-2 should be used if the crypto assets are held as investments, where gains are classified as capital gains.
ITR-3 is required if crypto trading is carried out as a business or professional activity.
Both these forms include a dedicated Schedule VDA for disclosing Virtual Digital Asset transactions such as purchases, sales, and TDS deductions. Using the correct form is essential for compliance and to avoid return rejection by the Income Tax Department.
Q5. Can losses from crypto trading be carried forward?
No. As per Section 115BBH of the Income Tax Act, any losses arising from crypto trading or transfers of Virtual Digital Assets cannot be carried forward to future years or set off against other income, including other crypto gains. This means even if an investor incurs losses in one cryptocurrency and gains in another, the loss cannot offset the gain. The entire gain is taxable at a flat rate of 30%, with no deductions allowed apart from the cost of acquisition. Maintaining detailed transaction records is crucial for compliance and future audit requirements.
Q6. Is TDS applicable on crypto income
Yes. Section 194S mandates a 1% TDS (Tax Deducted at Source) on crypto transactions if the total value of transactions exceeds ₹50,000 in a financial year (₹10,000 for certain users). The responsibility of deducting TDS lies with the payer, which could be an exchange or another individual making the payment. The deducted amount must be reflected in Form 26AS and claimed as a tax credit while filing ITR. Non-deduction or delayed deposit of TDS can attract penalties under the Income Tax Act. Platforms like TaxBuddy help reconcile TDS records automatically for accurate reporting.
Q7. Are mining or staking rewards taxable?
Yes. Income from crypto mining or staking is taxable under Section 115BBH at a rate of 30% in the year it is received. For miners, the fair market value of the mined tokens on the date of receipt is treated as taxable income. For staking rewards, the same rule applies — the value of tokens at the time of credit is taxed. If these assets are later sold or exchanged, the difference between the sale price and the value at receipt is again taxable as per Section 115BBH. Proper valuation records and transaction logs are necessary for accurate tax computation.
Q8. Are crypto gifts taxable in India?
Yes. Gifts of cryptocurrencies or NFTs are taxable in the hands of the recipient under the “Income from Other Sources” head if their fair market value exceeds ₹50,000. However, exemptions are available if the gift is received from specified relatives (such as parents, spouse, siblings) or on certain occasions like marriage or inheritance. The value of the gift is considered as income and taxed at a flat rate of 30% under Section 115BBH. Recipients should maintain documentation of the transfer, valuation, and relationship details for verification purposes.
Q9. Does GST apply to crypto trading services?
Yes. Since July 2025, the GST Council has clarified that all crypto exchange and platform services are subject to an 18% Goods and Services Tax (GST). This applies to services such as trading, custody, wallet maintenance, and withdrawal. Crypto exchanges must register under GST irrespective of their turnover as they are categorized as “Online Service Providers.” For traders and investors, this means that any service fee or commission charged by exchanges will include GST, which should be factored into overall transaction costs.
Q10. Can crypto income be reported under “Other Sources”?
No. Crypto income cannot be reported under the “Income from Other Sources” category. Depending on the nature of activity, it must be classified as either Capital Gains or Business Income. Investments held for appreciation fall under capital gains, while frequent or large-scale trading qualifies as business income. Misreporting crypto gains under the wrong head may lead to notice or reassessment by the Income Tax Department. Using the correct category ensures accurate taxation under Section 115BBH and helps avoid compliance issues.
Q11. What is Schedule VDA in ITR forms?
Schedule VDA is a dedicated reporting section introduced in ITR-2 and ITR-3 for disclosing income from Virtual Digital Assets such as cryptocurrencies and NFTs. Taxpayers are required to report each transaction’s date, type of asset, sale consideration, cost of acquisition, and TDS details under Section 194S. The schedule ensures transparency and allows the Income Tax Department to track crypto income separately. Incomplete or incorrect reporting in this section can lead to rejection of the return or further inquiry. TaxBuddy’s automated filing system ensures that all entries in Schedule VDA are correctly mapped.
Q12. How does TaxBuddy help with crypto tax filing?
TaxBuddy provides a complete solution for individuals and businesses dealing in cryptocurrencies. Its AI-driven system automatically detects crypto transactions, calculates gains and losses as per Section 115BBH, and integrates TDS data from Form 26AS. The platform also generates detailed reports for Schedule VDA, validates GST applicability, and offers expert assistance for complex cases like staking, mining, or cross-border crypto holdings. With secure filing and human oversight, TaxBuddy ensures accurate, compliant, and hassle-free ITR filing for crypto taxpayers.
