Virtual Digital Asset (Crypto) Tax Advisory

Indian tax law doesn't use the word "cryptocurrency" — it uses Virtual Digital Asset (VDA), defined under Section 2(47A) of the Income Tax Act, and the rules for VDAs are separate from anything used for shares, mutual funds, or property. That separation is exactly where most people get it wrong, because it doesn't behave like the capital gains rules they're already used to.

How spot trading is actually taxed

Under Section 115BBH, gains from transferring a VDA are taxed at a flat 30%, plus a 4% cess — an effective 31.2%, regardless of your income slab or how long you held the asset. There's no long-term holding benefit, and the only deduction allowed is the cost of acquisition — exchange fees, platform charges, and internet costs are not deductible against the gain. And VDA losses cannot be set off against gains from other assets, or carried forward to future years — a rule that trips up people who assume crypto losses work like any other capital loss.

Where F&O trading is different again

Crypto futures and options income is classified as business income, taxed at your applicable slab rate (not the flat 30%), which means it has to be reported on ITR-3 specifically — filing the wrong form can render the return defective. Losses here can be set off, but only against other speculative gains, and only if the return is filed within the due date.

TDS you may not know is already happening

A 1% TDS applies on the transfer of VDAs under Section 194S. This is often deducted automatically by the exchange, but reconciling it against what's actually reflected in Form 26AS/AIS is a step people routinely skip — and a mismatch here is exactly the kind of thing that draws a notice.

Increased scrutiny is not theoretical

Exchanges are required to report transaction data directly to tax authorities, and the department uses analytics to flag discrepancies between what's reported and what's declared. Treating a crypto trade as informal because it happened inside an app is the single most common reason people end up explaining themselves later.

What we handle

Gain computation on spot trades, with correct cost-basis treatment
Business income classification and ITR-3 filing for F&O traders
TDS (Section 194S) reconciliation against Form 26AS/AIS
Advisory on record-keeping across exchanges, including foreign platforms

At A Glance

Spot trading gain computation at the correct flat rate
F&O classification and ITR-3 filing
Section 194S TDS reconciliation
Multi-exchange record consolidation

Documents typically needed:

Exchange-wise transaction statements for the financial year
TDS certificates or Form 26AS/AIS extract
Wallet-to-wallet transfer records, if applicable
Prior year ITR, if VDA losses are being tracked