'Bull or bear market...': Expert says taxman wants 30%, so file clean, file smart

The Indian crypto dream — big bets, overnight gains, and talk of financial freedom — now comes with a hard reality: a flat 30% tax on profits, no matter the market mood. Since April 1, 2022, cryptocurrency has been brought under a dedicated taxation regime, and the Income Tax Department has made it clear — profits are theirs to tax, losses are yours to keep.

CA Mayank W. says, “The tax department doesn’t care whether it’s a bull market or bear market — if you’ve made a profit, the 30% flat rate applies. And if you’ve made a loss, you can’t set it off against other income.”

Taxation of cryptocurrencies

In 2025, Indian crypto investors face a four-layer tax burden. First, profits from virtual digital assets are taxed at a flat 30% under Section 115BBH, with no allowance for setting off losses. On top of this, a 4% cess applies, pushing the effective tax rate to 31.2%. Every sale transaction — whether profitable or not — attracts 1% TDS on the total value under Section 194S. And since July 7, 2025, an 18% GST is levied on all crypto platform service fees, including trading charges, withdrawal fees, and staking-related costs, though not on the value of the crypto asset itself.

Section 115BBH

Under Section 115BBH of the Income Tax Act, income from Virtual Digital Assets (VDAs) — including Bitcoin, Ethereum, NFTs, and tokens — is taxed at a flat 30% rate on gains. There is no preferential treatment for long-term holdings, no expense claims, and no set-off of losses against other income. Even “gas fees” or exchange commissions cannot be deducted. Losses from crypto trades also cannot be carried forward to future years.

CA Mayank explains that, on top of this, 1% TDS under Section 194S applies on transactions above Rs 10,000 in a year (Rs 50,000 for certain small investors), to be deducted by the buyer or the exchange. The TDS deducted appears in Form 26AS and is adjusted against final tax liability.

From July 2025, an additional layer applies: 18% GST on service fees charged by crypto exchanges and wallet providers for trading, staking, or custodial services. “The GST isn’t on the crypto itself,” Mayank clarifies, “but on the platform’s fees — which still adds to the transaction cost for traders.”

What needs reporting

According to CA Mayank, every crypto transaction must be reported with:

Date of trade

Buy and sell values in INR

Name of the platform (WazirX, Binance, CoinDCX, etc.)

TDS deducted under Section 194S

Wallet addresses and transfer details for peer-to-peer (P2P) trades

Each trade is calculated separately — if you have 40 trades in a year, you must compute gain or loss for all 40. Reporting only the net gain is non-compliant.

Filing the right way

Use ITR-2 if crypto is an occasional investment; ITR-3 if it’s part of your business activity.

Report under the “Income from Other Sources — VDA” section.

Reconcile your trades with Form 26AS and Annual Information Statement (AIS) to match TDS entries.

Pay self-assessment tax if your total tax due exceeds TDS already deducted.

Common mistakes

CA Mayank warns against:

Using ITR-1 despite having crypto income.

Ignoring P2P or foreign exchange trades.

Claiming set-off for crypto losses — not allowed under 115BBH.

Not matching reported income with TDS in 26AS, leading to mismatch notices.

Case in point

A Bengaluru tech professional traded Rs 7.6 lakh worth of crypto in FY 2023–24 and made Rs 1.4 lakh in profit. He ignored it while filing returns, but Form 26AS showed Rs 7,600 TDS under Section 194S. A mismatch notice followed. After filing a revised ITR-2, paying Rs 36,400 in tax, and updating the trade log, his case was cleared and his salary refund released, with no penalty.

Bottomline

“Crypto might be decentralised, but in India, tax rules are centralised — and uncompromising,” says CA Mayank. Whether you’re in profit or loss, the reporting requirements remain. Filing clean, detailed returns is the only way to avoid scrutiny and keep the gains you’ve made in the fast-moving digital asset market.