Section 115BBH: Crypto Tax Rules and Reporting Format
- Dipali Waghmode
- Nov 30
- 9 min read
Section 115BBH governs the tax treatment of cryptocurrencies, NFTs, and all Virtual Digital Assets in India. The rule imposes a flat 30 per cent tax on income from transfers of VDAs, disallows loss set-offs, and mandates detailed disclosure through Schedule VDA in the income tax return. TDS under Section 194S applies to eligible transactions, and accurate reporting is required to avoid notices or penalties. As crypto use grows, understanding the exact rules of Section 115BBH, the reporting format, and the treatment of each transaction becomes essential for compliant filing.
Table of Contents
Section 115BBH: Overview of Crypto Tax Rules
Section 115BBH forms the backbone of India’s crypto taxation framework. It defines how income from Virtual Digital Assets, such as cryptocurrencies and NFT,s must be taxed, reported, and disclosed in the income tax return. The section applies the same rules to everyone, whether the income comes from occasional investment activity or regular trading. The legislation aims to create uniformity by setting a fixed tax rate, eliminating deductions, and enforcing transparent reporting through a dedicated disclosure schedule. With these rules, crypto activity is treated as a separate income stream that requires careful calculation and proper compliance.
30 Percent Crypto Tax Under Section 115BBH
Crypto income from the transfer of VDAs is taxed at a flat 30 per cent. This is applied to the profit earned from selling or transferring the digital asset. The tax rate does not depend on the income slab or whether the taxpayer is salaried, a business owner, or an investor. A 4 per cent health and education cess applies to the tax amount, and a surcharge may apply based on income level. The cost of acquisition is the only reduction allowed in arriving at the taxable income. All other deductions, rebates, or exemptions are specifically disallowed under this rule.
How Crypto Losses Are Treated Under Section 115BBH
Loss treatment under this section is highly restrictive. Losses arising from crypto trading cannot be set off against any other income, such as salary, business income, interest, rent, or capital gains from other assets. Even losses from one VDA cannot be set off against gains from another VDA. Further, any unabsorbed loss cannot be carried forward to the next financial year. Only the acquisition cost can be reduced from the sale value to compute the taxable income. These stringent rules highlight the importance of tracking each transaction separately to avoid misreporting or incorrect set-offs.
TDS on Crypto Transactions Under Section 194S
Section 194S introduces a mandatory 1 per cent TDS on payments for the transfer of VDAs. The purpose of TDS is to create a transaction-level trail for tax authorities and ensure crypto trades are transparently recorded. When buyers purchase VDAs above the threshold limits, they must deduct TDS before making the payment. Crypto exchanges often handle TDS automatically for ease of compliance. The deducted tax appears in Form 26AS and AIS, helping users verify whether their crypto-related TDS has been correctly reported. These details must match the values reported in Schedule VDA to avoid mismatches or notices.
Reporting Format for Crypto in Schedule VDA
Schedule VDA forms a dedicated section in the income tax return where taxpayers must enter detailed information for each crypto transaction. The required details include the date of acquisition, date of transfer, type of VDA, sale value, cost of acquisition, and the amount of TDS deducted. Every transaction must be reported separately; summarised entries are not permitted. Accurate reporting ensures seamless processing, correct tax computation, and reduced chances of scrutiny. Proper record-keeping becomes essential because the tax department may request supporting documentation for high-value or frequent transactions.
Crypto Income Classification: Capital Gains vs Business
The nature of crypto income depends on trading behaviour. When VDAs are held as an investment and sold occasionally, the income typically falls under capital gains. When trades are frequent, systematic, or carried out with the intention of profit-making, the income may be classified as business income. However, Section 115BBH applies the 30 percent tax rate regardless of classification. The key difference lies in how such income appears in the computation statement and which reporting fields are used. Proper classification helps maintain clarity if the tax department reviews trading patterns during assessment.
GST Impact on Crypto Platforms
Crypto platforms offering services such as trading, brokerage, wallet services, or transaction facilitation may charge GST on their service fees. The GST is applied on the service component, not on the crypto asset itself. For traders, this increases the overall transaction cost, especially for high volumes or frequent activity. While GST does not directly affect the income tax liability under Section 115BBH, it remains an important part of the total cost of trading and should be factored into personal record-keeping.
Gifts of Crypto and Their Taxability
Gifts of VDAs follow the standard tax rules for gifts. When the total value of crypto gifts received during a financial year exceeds ₹50,000, the entire amount becomes taxable as income from other sources at 30 per cent unless covered by exemptions. Gifts from relatives, gifts received on marriage, or gifts under specific permitted situations are exempt. Recipients must report the fair market value of the crypto received on the date of receipt. When the gifted VDA is later sold, the cost of acquisition is considered the value at which the previous owner acquired it, ensuring a consistent tax trail.
Record-Keeping Requirements for Crypto Reporting
Accurate record-keeping is essential for reporting crypto income under Section 115BBH. Details such as transaction IDs, screenshots, exchange statements, wallet addresses, date-wise trading logs, and TDS confirmations should be preserved. Several exchanges may not maintain long-term transactional history, making personal tracking even more important. Proper documentation supports clear disclosures in Schedule VDA and reduces the chances of discrepancies that often lead to scrutiny or demands for clarification.
Due Dates for Filing Crypto Income
Crypto income must be reported within standard income tax filing timelines. For individuals who do not require an audit, the due date is generally July 31. For those whose trading activity triggers an audit requirement under Section 44AB, the due date extends to October 31. Missing the due date may lead to penalties, interest, or delayed refunds. Filing early also ensures sufficient time to rectify errors, verify TDS entries, and reconcile reports with Form 26AS and AIS.
Why TaxBuddy Helps Simplify Crypto Tax Filing
Crypto taxation involves complex rules, detailed reporting formats, TDS traces, and constant reconciliation with AIS and Form 26AS. TaxBuddy streamlines this entire process by automatically mapping crypto trades into Schedule VDA and identifying the correct tax liability under Section 115BBH. The platform integrates TDS information, handles mismatches, and resolves classification issues, offering expert assistance for users with active trading patterns. Its intelligent system supports compliance for exchanges, wallet activity, NFT transfers, staking-related income, and cross-border holdings. With accurate reporting and expert review, TaxBuddy reduces filing errors and ensures a smoother filing experience.
Conclusion
Section 115BBH marks one of the most significant regulatory steps in India’s taxation of cryptocurrencies and NFTs. Its fixed tax rate, stringent loss rules, and detailed reporting requirements demand careful financial tracking and accurate filing practices. TaxBuddy simplifies this compliance work through automated transaction mapping, expert guidance, and seamless reporting tools designed for modern VDA activity. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy 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 provides two flexible ways to file returns. The self-filing option is designed for individuals with simple tax situations, such as salary income or a few capital gains, where the platform automatically pulls Form 16, AIS, and TDS data for a fast, guided filing experience. The expert-assisted plan is ideal for taxpayers with more complex needs, such as crypto income under Section 115BBH, frequent trading, business income, multiple investments, or foreign assets. Under this plan, a tax professional reviews every entry, resolves mismatches, validates Schedule VDA, and ensures filing accuracy as per the latest tax rules.
Q2. Which is the best site to file ITR? The income tax department’s official portal remains the default government platform for filing returns. However, many taxpayers prefer using advanced platforms that simplify the process. TaxBuddy stands out for its automation, real-time data fetch from Form 26AS and AIS, smart error detection, and expert-assisted support. For individuals dealing with crypto income, multiple trades, or issues related to Schedule VDA, TaxBuddy offers a much smoother, faster, and more accurate experience compared to filing manually.
Q3. Where to file an income tax return? An income tax return can be filed directly on the government portal or through reliable platforms such as TaxBuddy that provide a guided and error-free filing process. TaxBuddy is particularly useful for taxpayers who want automated data mapping, simple document uploads, instant AIS reconciliation, and expert involvement in handling situations like crypto tax reporting, capital gains, business income, or notices.
Q4. Can losses from crypto trading be claimed under Section 115BBH? Losses from the transfer or sale of cryptocurrencies and NFTs cannot be set off against any income, whether from salary, property, business, or capital gains from other assets. Such losses cannot be carried forward to future years either. Only the acquisition cost can be reduced from the sale value. This makes it essential for taxpayers to calculate gains accurately for every VDA transaction, as Section 115BBH follows a strict no-adjustment approach to losses.
Q5. What is the TDS rate on cryptocurrency transactions? A 1 percent TDS is deducted under Section 194S on payments made for the transfer of VDAs. The TDS applies on the total transaction value, not on the profit component. The responsibility to deduct TDS lies with the buyer when transactions exceed the prescribed thresholds, although most crypto exchanges handle this automatically. The deducted amount gets reflected in Form 26AS, and taxpayers must verify these entries while reporting under Schedule VDA.
Q6. How to report NFT sales in an income tax return? NFTs are treated as Virtual Digital Assets and must be reported in Schedule VDA of the ITR. Each sale requires complete disclosure, including the date of purchase, date of sale, cost of acquisition, sale value, and the TDS deducted under Section 194S if applicable. Accurate reporting ensures that the tax computation under Section 115BBH is correct and reduces the likelihood of receiving queries or mismatch notices from the income tax department.
Q7. Are gifts of cryptocurrencies taxable in India? Gifts of cryptocurrencies are treated similarly to other movable assets under gift taxation rules. When the total value of crypto gifts received in a financial year exceeds ₹50,000, the entire amount becomes taxable as income from other sources, unless the gift comes from a relative or is received under specific exempted circumstances such as marriage. When the gifted asset is later sold, the cost of acquisition is considered to be the cost at which the original owner purchased it.
Q8. What details must be reported in Schedule VDA? Schedule VDA requires a transaction-by-transaction breakdown of all crypto and NFT transfers made during the year. Taxpayers must enter the nature of asset, acquisition date, transfer date, cost of acquisition, sale value, and TDS deducted under Section 194S. Aggregated reporting or bulk summarised entries are not allowed. The section is designed to ensure clear audit trails and full transparency in VDA-related income.
Q9. How does TDS under Section 194S work for crypto? Under Section 194S, the buyer must deduct 1 percent TDS when purchasing a VDA from the seller. If the transaction occurs through an exchange, the exchange may deduct TDS on behalf of the parties, depending on transaction architecture. For peer-to-peer transfers, the buyer handles TDS deduction and payment. These TDS amounts appear in Form 26AS, and taxpayers must cross-check them when filing their returns to avoid inconsistencies.
Q10. Are crypto exchanges required to charge GST? Crypto exchanges are required to charge GST on the services they provide, such as trading fees, brokerage charges, or platform services. GST applies only to the service component, not to the crypto asset itself. For active traders, GST can influence overall trading costs, so it is important to account for these charges when computing net gains or maintaining records for tax compliance.
Q11. Are crypto transactions treated as capital gains or business income? The classification depends on the taxpayer’s intent and trading pattern. Occasionally, long-term holdings are generally treated as investments and taxed as capital gains. However, frequent or systematic trading activity may be treated as business income. Regardless of classification, income from the transfer of VDAs is still taxed at 30 per cent under Section 115BBH. The classification mainly affects how the income appears in computation statements, not the tax rate itself.
Q12. How does TaxBuddy assist with crypto tax compliance? TaxBuddy simplifies crypto tax filing by automatically mapping trades from exchanges, wallets, and investment platforms into Schedule VDA. It reconciles TDS entries from Form 26AS, identifies mismatches, validates each transaction for 115BBH compliance, and resolves reporting inconsistencies. The expert review layer ensures that staking rewards, NFT trades, cross-border transfers, and multi-exchange data are correctly handled. This reduces the risk of errors and helps taxpayers file accurate returns without worrying about scrutiny or notices.
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