The journey of cryptocurrency is like a game of snakes and ladders – a thrilling journey with the potential for rags-to-riches stories and the harsh reality of sudden downfalls.
Bitcoin’s recent surge exemplifies this perfectly, with a staggering 150% increase in the past six months, capped off by an additional 50% leap in just the last month! However, this volatility is a double-edged sword. High-profile hacks and scams have shaken trust in the system, highlighting the urgent need for regulations that can balance innovation with consumer protection.
As the regulatory landscape for cryptocurrency in India continues to take shape, Indian crypto enthusiasts face a unique set of tax and compliance challenges.
Here’s a roadmap to navigate this exciting frontier:

Tax on Profits:
● Flat 30% Tax: Profits earned from trading cryptocurrencies are taxed at a flat rate of 30% (plus 4% cess) under Section 115BBH.
● TDS on Transfers: A 1% Tax Deducted at Source (TDS) applies to crypto transfers exceeding Rs. 50,000 (or Rs. 10,000 in specific cases) after July 1st, 2022 (Section 194S). Indian exchanges typically handle this automatically, but for P2P and foreign exchanges, you might be responsible. This applies to both buyers and sellers in crypto-to-crypto transactions.
Losses and Reporting:
● No Loss Offsetting: Unlike other investments, you cannot offset losses from crypto transactions against your other income. Losses in one cryptocurrency cannot reduce the taxable gains from another.
● Disclosures Mandatory: New ITR forms require reporting all your crypto transactions. Whether reported as capital gains or business income depends on how you hold the crypto (investment or trading).
Taxable and Non-Taxable Events:
● Taxable Events: Selling, swapping, or spending cryptocurrencies are considered taxable events.
● Non-Taxable Events: Transferring crypto between your own wallets or simply holding them generally does not incur tax.
Taxation of Mining Income:
● Flat 30% Tax on Mining: The income earned from mining cryptocurrency is taxed at a flat 30% based on the cryptocurrency’s fair market value at the time of mining.
● No Deduction for Mining Expenses: There’s no provision to deduct mining expenses like electricity or hardware costs.
● Taxation of Mined Crypto Sales: Capital gains tax applies to profits from selling, swapping, or spending mined crypto. However, the cost basis for calculating capital gains is considered zero, meaning you cannot deduct mining expenses to reduce the taxable gain.
FIU Compliance:

Registration with FIU-IND: For certain Virtual Digital Asset Service Providers (VASP) operating in India, registration with the Financial Intelligence Unit-India (FIU-IND) is mandatory. This registration comes with obligations for reporting suspicious transactions and implementing anti-money laundering (AML) and combating the financing of terrorism (CFT) measures.