Got crypto gains or gifts? Here's why the taxman could soon come calling

'Every crypto move is taxable,' warn experts, as AI-powered tax tools tighten the net on undeclared gains, swaps, gifts, and even crypto spent on shopping.

If you’ve made money on Bitcoin, Ethereum, or any other cryptocurrency and skipped mentioning it in your income tax return (ITR), you might be in trouble, with the Income Tax Department now using AI and advanced tech to detect such undeclared gains.

 

“As per Section 115BBH introduced in FY22–23, any income from the transfer of virtual digital assets (VDAs) like Bitcoin, Ethereum, or NFTs is taxed at a flat 30 per cent, with no deductions allowed except the cost of acquisition,” explains Sathvik Vishwanath, co-founder and chief executive officer, Unocoin. This includes crypto-to-INR sales, crypto-to-crypto swaps, using crypto for purchases, and even gifting.

 

Every crypto move is taxable

 

“Whether you're selling, swapping coins, receiving gifts, or using crypto for shopping, every such event is a taxable transfer,” notes Purvang Mashru, senior quantitative research analyst at 1 Finance.

 

This flat 30 per cent tax is applicable across the board:

 

·  Crypto sold for INR

 

·  Crypto exchanged for another coin

 

·  Crypto gifted or received

 

·  Crypto spent on goods/services

 

A 1 per cent TDS under Section 194S also applies on transactions exceeding ~10,000 a year, deducted by the exchange or payer, and reported to the government.

 

Additionally, any airdrop, staking rewards, or crypto salaries are taxed at your slab rate, adds Sonu Jain, chief risk and compliance officer, 9Point Capital.

 

Skipping crypto in ITR? ‘Risky move’, say experts

 

“The tax department has extensive mechanisms to track undeclared crypto activity,” warns Chartered Accountant Suresh Surana. Exchanges are mandated to deduct and report TDS, and from FY26–27, must file user-level reports under Section 285BAA.

 

“Failing to disclose crypto gains can lead to penalties under Section 270A or prosecution under Section 276C, with jail terms up to 7 years for willful evasion,” Surana adds.

 

Purvang Mashru warns that unexplained crypto income could even be taxed at 60 per cent under anti-evasion rules.

 

Swapping coins? Still taxed

 

A common myth is that crypto-to-crypto trades are tax-free. That’s incorrect.

 

“Whether you convert Bitcoin to Ethereum or buy an NFT using crypto, it is a taxable event,” clarifies Jain. The gain is calculated as the difference between your purchase price and the value of the crypto you received.

 

No relief, no set-offs

 

Indian tax rules offer no mercy when it comes to crypto.

 

“There are no exemptions, no expense deductions, no set-off against other income, and no carry-forward of losses,” says Siva Venkataraman, vice-president, Finance at CoinSwitch. “Even transaction fees or electricity costs for mining are not allowed.”

 

Surana adds, “Rebates like Section 87A may help those with total income under Rs 5 lakh, but crypto gains remain taxed at 30 per cent, with surcharge and cess.”

 

What should you do?

 

Experts agree that one should declare their crypto gains transparently and file taxes accurately.

 

“Maintaining records, tracking acquisition cost, and using compliant platforms can help manage your tax liability,” advises Venkataraman.

 

With rising regulatory scrutiny, experts stress that tax planning is as crucial as investment strategy in the crypto world.