Crypto Gains Still Taxed at 30%—But the 2025 Income Tax Act Demands Far Stricter Reporting from Investors and Exchanges

Crypto Taxation Under the Income-tax Act, 2025: What Changes, What Stays the Same

The much-anticipated Income-tax Act, 2025, set to take effect on 1 April 2026, confirms India’s tough stance on taxing Virtual Digital Assets (VDAs)—including cryptocurrencies, tokens, NFTs, and similar instruments. While the headline 30% tax rate remains untouched, the new Act introduces deeper compliance and reporting obligations for both investors and crypto service providers. Here’s what you need to know, whether you trade crypto as an individual, run an exchange, or simply hold digital assets.

What Qualifies as a VDA?

Section 2(111) of the new Act gives a clarified and explicit definition of VDAs. This covers crypto-assets, tokens, NFTs, and potentially new classes of blockchain-based assets. If you deal in any commonly traded crypto, you are firmly within this net.

Tax Basics: 30% on Gains, 1% TDS—No Set-Off, No Deductions

• Flat 30% Tax: All gains from transferring VDAs are taxed at 30%, regardless of your income bracket or how long you held the asset. There is no distinction between short-term and long-term holdings.
• Cost of Acquisition Is the Only Deductible: Only what you paid to buy the VDA can be reduced from your sale proceeds. Transaction fees, platform charges, or any other expenses—no matter how legitimate—are not deductible.
• Losses Cannot Be Set Off: If you lose money trading one crypto, you cannot set this off against profits from another, nor other heads of income. Losses can’t be carried forward to future years.

TDS on Crypto Transactions Now Under Section 393(1)

The ubiquitous 1% TDS (Tax Deducted at Source) on VDA transactions now finds a home in Section 393(1) of the 2025 Act. This applies to every transfer—whether from crypto to crypto, crypto to rupee, or even between wallets—subject to any specified thresholds. The TDS liability generally falls on the exchange, buyer, or transferor depending on transaction mechanics.

New Reporting Mandates: Section 509’s Annual Reporting Framework

A major innovation is Section 509, which establishes a new reporting framework for exchanges, custodians, and other crypto intermediaries:

• User Identity and Residency Verification: Platforms must verify customer identities and Indian tax residency status—not just KYC basics.
• Annual Transaction-Level Reporting: All eligible intermediaries must file an annual report (Form 167). This covers all VDA transactions, including not only buy/sell activity but crypto-to-crypto and wallet transfers.
• Reporting Period: The first such report, covering calendar year 2026, is expected to be filed in 2027.

Record-Keeping Responsibilities for Crypto Investors

For taxpayers, the compliance burden is heavier:

• Maintain Detailed Transaction Records: Investors must now keep records of each crypto transaction—dates, types, quantities, cost, proceeds, fees, exchange or platform used, wallet addresses, and any supporting documents.
• Include All Transfers: Reporting is not limited to buying and selling. Even moving coins between your own wallets or converting one token into another creates a taxable event and a reporting requirement.

Sample Crypto Transaction Record Table

FATCA-Style Transparency for Crypto Operations

The new rules mean the taxman will now receive far more granular data about who is transacting, when, and in what amounts. Individual investors’ transactions—across platforms, wallets, or even non-exchange trades—will be reported by exchanges and cross-matched against ITR filings and AIS/26AS statements.

What Failure to Report Can Cost You

Section 446 imposes penalties for non-compliance. While the exact quantum is not yet detailed, any failure by either investor or intermediary to file required reports—or inaccuracies—could attract stiff fines.

What’s Unresolved or Unclear

Some details have yet to be specified by CBDT or the implementing authorities:

• Penalty Details: How much could you (or an exchange) be fined for slip-ups or omissions? Section 446 is in place, but rates or bands are pending.
• Form 167 Details: The granular fields and digital formats are to be announced—watch for guidance in late 2025/early 2026.
• Tax Residency/Identity Verification: Exact KYC rules for tax residency remain to be detailed, especially for NRIs or users with multiple residencies.
• Off-Exchange Wallet Scrutiny: How transfers off exchanges will be tracked—given the pseudonymous nature of most blockchains—remains to be seen, but the reporting net is clearly widening.

Steps Crypto Investors and Platforms Should Now Take

1. Begin Systematic Record-Keeping: Start treating every VDA transaction like a financial security from now. Maintain contemporaneous purchase, sale, fee, and wallet records—even for transfers.
2. Engage with Your Exchange (or Platform): Ensure your platform will be compliant with annual Section 509 reporting and clarify how they will capture required KYC and transaction detail.
3. Reconcile with AIS/Form 26AS: When filing your ITR for Tax Year 2026 onwards, reconcile your self-kept records with reported numbers from exchanges and in Form 26AS.
4. Prepare for Calendar-Year Compliance: Compliance and reporting will shift to a tax year running from January to December—an adjustment from the previous norm of Assessment Year/Previous Year.
5. Stay Abreast of Updates: Look for updated rules, guidance notes, and portal features from mid-2025 onward.

Key Takeaways: Crypto Tax Compliance Under the 2025 Act

• Crypto profits remain taxed at 30% with 1% TDS, but compliance gets stricter.
• Investors and exchanges must maintain and submit far more detailed transaction records and annual reports.
• There are no tax breaks or loss offsets for VDA dealings—each gain is ringfenced.
• First reports under the new regime are due in 2027 (for calendar year 2026).
• Penalties loom for both under-reporting and failing to meet the new standards.