Cryptocurrency has transformed how we view money and digital assets. From Bitcoin to Ethereum and beyond, these digital currencies operate on decentralized blockchain networks, providing secure, transparent, and peer-to-peer financial transactions. However, as crypto adoption grows in India, so does the need to understand its tax implications.
Cryptocurrency is a form of digital or virtual currency secured through cryptography. Unlike traditional fiat currencies, cryptocurrencies are decentralized—typically built on blockchain technology, which eliminates the need for a central authority such as a government or bank. Transactions are verified by a distributed network of users (miners or validators), and once verified, recorded permanently on a blockchain ledger.
Bitcoin (BTC): The first and most recognized cryptocurrency, created in 2009 by the pseudonymous Satoshi Nakamoto. Often considered digital gold.
Ethereum (ETH): A decentralized platform supporting smart contracts and decentralized applications (dApps). Its native token is Ether.
Altcoins: Alternatives to Bitcoin, such as Litecoin (LTC), Ripple (XRP), and Cardano (ADA), offering improvements or unique features.
Stablecoins: Cryptos like Tether (USDT) and USD Coin (USDC), pegged to fiat currencies to minimize volatility.
Tokens: Digital assets created on existing blockchains like Ethereum, representing rights, assets, or utility within a network.
Indian users can buy crypto using INR through exchanges such as:
WazirX
CoinDCX
ZebPay
These platforms allow buying, selling, and holding a wide range of cryptocurrencies.
Crypto mining involves validating transactions and securing the network, typically using specialized hardware (ASICs or GPUs). Miners are rewarded in cryptocurrency.
Steps to Start Mining:
Invest in mining hardware.
Join a mining pool.
Use mining software to start earning rewards.
Platforms like FreeBitco.in distribute small amounts of cryptocurrency for free, often in exchange for simple online tasks. This is an entry point for beginners.
India has recognized Virtual Digital Assets (VDAs) under its tax laws, particularly following the Union Budget 2022. Below are the key tax provisions applicable in 2025:
No deductions (except cost of acquisition) or loss set-offs are permitted.
No indexation benefits apply for long-term holdings.
If crypto trading is carried out as a business, profits are taxable under regular income tax slabs as business income. Again, only the cost of acquisition is deductible.
Airdropped tokens are taxed at a flat 30% on their fair market value at the time of receipt.
Crypto received as a gift is taxed if its value exceeds ₹50,000, under the ‘Income from Other Sources’ head.
Losses from one VDA cannot be set off against gains from another or other sources of income. They cannot be carried forward either.
As per Section 194S of the Income Tax Act:
A 1% TDS is deducted on crypto transactions above ₹10,000 (₹50,000 for specified persons) in a financial year.
The exchange or platform facilitating the transaction deducts the TDS at the time of transfer.
The application of Goods and Services Tax (GST) on cryptocurrency is still evolving. Key points:
Services provided by crypto exchanges (such as conversion, trading fees) may attract 18% GST.
The buying or selling of crypto itself is not currently subject to GST unless part of a service-based transaction.
Profits from mining and staking are considered business income and taxed as per the applicable income tax slab.
All expenses related to mining setups may be deductible if reported as a business.
Indian residents holding cryptocurrencies on foreign exchanges must declare these as foreign assets in their ITRs (as applicable).
Valuation must be done using the prevailing exchange rate at the time of reporting.
As of now, India does not levy wealth tax on cryptocurrencies.
However, crypto holdings may be considered while assessing the value of total assets for other regulatory or financial purposes.
The Indian government continues to maintain a cautious approach toward cryptocurrencies:
Concerns about misuse for illegal activities remain high.
The RBI is actively exploring the launch of a Central Bank Digital Currency (CBDC) or Digital Rupee, aiming for a regulated digital financial environment.
Comprehensive crypto regulation is still in development, although taxation policies are already in force.
India’s crypto taxation policy may seem stringent, but it provides much-needed clarity for participants in the space. For individuals and businesses dealing in cryptocurrencies, here’s what to keep in mind:
✅ Maintain detailed transaction records.
✅ Track crypto holdings, including those on foreign platforms.
✅ Be aware of TDS compliance and report accurately in your tax return.
✅ Seek advice from a qualified tax advisor for better risk management.
While the sector is still evolving, proactive compliance will position you well for future opportunities as regulations mature.
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