Key facts
- India's Income Tax Act, 2025, is in effect, but FY 2025-26 filings still follow the 1961 Act's crypto tax provisions.
- A 30% tax on crypto profits and a 1% TDS on transfers over Rs 10,000 remain in place.
- Crypto exchanges are now mandated to report user transaction data directly to the Income Tax Department.
- Schedule VDA in ITR-2 or ITR-3 requires detailed, transaction-by-transaction reporting of all crypto activities.
- India will adopt the OECD's Crypto-Asset Reporting Framework by April 1, 2027, enabling cross-border data sharing.
- Common mistakes include incorrect ITR form selection and incomplete reporting of staking rewards, airdrops, and DeFi income.
For cryptocurrency investors in India, the 2026 tax season presents a more stringent enforcement environment, despite no dramatic changes to the core tax rules. The Income Tax Act, 2025, which came into force on April 1, 2026, replaces the 1961 Act, but for the Financial Year 2025-26, the provisions of the older Act still govern crypto tax obligations.
The fundamental framework remains a flat 30% tax on profits from Virtual Digital Assets (VDAs), a 1% Tax Deducted at Source (TDS) on transfers exceeding Rs 10,000, and a prohibition on offsetting losses from one crypto asset against gains from another. Deductions are limited solely to the cost of acquisition.
The primary shift lies in the enhanced penalty framework and increased enforcement capabilities. Crypto exchanges, custodians, and wallet providers are now obligated to submit user-level transaction statements directly to the Income Tax Department. This data is automatically cross-referenced with individual tax filings, flagging any discrepancies.
Investors must accurately report all transactions, including crypto-to-crypto swaps and income from staking or airdrops, in the dedicated Schedule VDA section of their Income Tax Return (ITR-2 for capital gains or ITR-3 for business income). Failing to report even a single crypto-to-crypto swap can lead to penalties for non-disclosure, as such swaps are considered taxable events.
The Income Tax Department has already initiated action, issuing over 44,000 notices and identifying more than Rs 888 crore in undisclosed VDA income, utilizing Annual Information Statements, exchange TDS filings, and blockchain analytics. The gap between reported and actual crypto income is rapidly narrowing.
Looking ahead, India's Central Board of Direct Taxes (CBDT) has confirmed alignment with the OECD's Crypto-Asset Reporting Framework, with domestic enforcement targeted for April 1, 2027. This will facilitate cross-border data sharing, making international crypto holdings visible to Indian tax authorities. Investors using foreign exchanges are advised to organize their records this year.
Common errors include selecting the incorrect ITR form (e.g., ITR-1 for crypto income), incomplete Schedule VDA reporting, and failing to reconcile TDS. The most effective solution for all these issues is diligent record-keeping throughout the year, rather than attempting to reconstruct data at the last minute.