Are You Paying the Right Tax on Your Virtual Digital Assets (VDAs)? Here’s What You Need to Know Before Filing Your ITR

With India’s growing adoption of cryptocurrencies, NFTs, and tokens, it’s critical for investors and traders to understand how these Virtual Digital Assets (VDAs) are taxed and reported. Since FY 2022-23, the Income Tax Department has rolled out strict guidelines, leaving no room for guesswork.

Here’s a simple, comprehensive guide to help you stay compliant and avoid penalties.

Tax on VDAs – Section 115BBH

Tax Treatment	Details
Tax Rate	Flat 30% on gains from VDAs
Deductions	Only cost of acquisition allowed (No deduction for gas fees, brokerage, etc.)
Losses	Cannot be set off or carried forward
Effective From	FY 2022–23 (AY 2023–24 onwards)

TDS on VDA Transactions – Section 194S

If you’ve bought or sold crypto above certain thresholds, TDS at 1% kicks in:

Threshold	Who is Liable?	TDS Required?
INR 50,000/year	Individuals or HUFs with business turnover > INR 1 Cr or professional receipts > INR 50L	Yes
INR 10,000/year	All other users	Yes

• Indian Exchanges auto-deduct TDS.
• On foreign exchanges, you must deduct and deposit TDS.

Tip: Check Form 26AS or AIS to confirm TDS has been credited properly.

How to Report VDAs in Your ITR

What is Schedule VDA?

A new section in ITR forms introduced for declaring:

• Date of acquisition and sale
• Type of VDA (Crypto/NFT/etc.)
• Platform/Exchange used
• Cost and sale value

Which ITR Form Should You Use?

Nature of Holding	ITR Form	Tax Head
Investment	ITR-2	Capital Gains
Trading (Business income)	ITR-3	Business & Profession

Foreign VDAs & FEMA/Black Money Compliance

If you hold VDAs on foreign wallets or exchanges, you must report them in Schedule FA of your ITR.

Non-disclosure can trigger:

• Penalty under the Black Money Act
• FEMA scrutiny for violation of cross-border investment norms
• Declare all foreign crypto assets even if no transaction was made during the year.

Final Checklist for VDA Reporting

✔ Maintain detailed records of:

• Wallet IDs
• Dates of buy/sell
• Transaction values
• Cost of acquisition

✔ Match TDS entries in Form 26AS
✔ File accurate ITR (use ITR-2/ITR-3 as needed)
✔ Disclose foreign-held crypto in Schedule FA
✔ Consult a tax expert for complex transactions

Conclusion

With the government watching crypto transactions more closely than ever, accurate reporting in your ITR is non-negotiable. The 30% tax rule may sound harsh, but failing to report VDAs correctly could lead to even harsher penalties.

Don’t wait until the last minute—gather your documents, cross-check your TDS, and file the correct return today.

Ensure Accurate Tax Reporting for Your Virtual Digital Assets (VDAs)

With the strict guidelines on VDAs, it’s essential to ensure your tax reporting is correct to avoid penalties. If you’re unsure about how to file your ITR or need help with complex VDA transactions, our experts can assist you. Get in touch with us today for personalized advice on reporting your virtual digital assets and staying compliant with the latest tax rules.