Didn't report crypto gains? Here's how to fix your ITR
What's the story
The Income Tax Department has issued notices to thousands of taxpayers who failed to declare their cryptocurrency earnings in their returns for the assessment years 2023-24 and 2024-25. The move is part of the department's Non-intrusive Usage of Data to Guide and Enable (NUDGE) initiative, which seeks voluntary compliance without coercion. Many taxpayers either skipped the mandatory 'Schedule VDA' or misreported gains from virtual digital assets (VDAs), including cryptocurrencies.
Allegations
Notices sent to thousands of taxpayers
Several taxpayers are accused of using unaccounted money to invest in cryptocurrencies, raising concerns over potential tax evasion and money laundering. The notices serve as a reminder that all income from cryptocurrencies, including trading, mining, staking, airdrops or salary paid in cryptocurrency must be declared in the Income Tax Return (ITR). Under Section 115BBH of the Income Tax Act introduced by Finance Act 2022, income from VDAs is taxed at a flat 30% irrespective of holding period.
Tax rules
No deductions are permitted on cryptocurrency income
No deductions are permitted on cryptocurrency income, except for the cost of acquisition. You also can't offset crypto losses against any other income or carry them forward. A 1% Tax Deducted at Source (TDS) under Section 194S is applicable on all cryptocurrency transactions. "Crypto assets attract a flat 30% tax. TDS compliance is crucial—failure to deduct or deposit it could lead to penalties or even imprisonment," warns Sumit Gupta, co-founder at CoinDCX.
Reporting process
How to report crypto in ITR?
To report cryptocurrency in ITR, choose the right form: ITR-2 if crypto gains are treated as capital gains and ITR-3 if trading is part of business income. All types of crypto income must be declared including buying/selling, staking rewards, mining proceeds, airdrops or payments received in cryptocurrency. Check Form 26AS for accurate TDS deduction by your crypto exchange. You can't claim cost indexation or adjust losses from crypto against other income.
Compliance tips
Discrepancies often arise when investors use offshore or unregulated platforms
Tax officials say discrepancies often arise when investors use offshore or unregulated platforms that don't deduct TDS or provide proper transaction summaries. "To avoid filing errors, it's best to use regulated Indian platforms that deduct TDS automatically and offer built-in tax reporting tools," Gupta said. A dedicated 'Schedule VDA' will be introduced from FY 2025-26 in the ITR forms to simplify crypto reporting further.