💡 Key Takeaway
Crypto transactions must be reported in your Income Tax Return under "Income from Other Sources" with proper documentation and TDS credit claims.
Which ITR Form to Use?
For most individuals with cryptocurrency transactions, you'll need to file ITR-2 or ITR-3 depending on your other income sources. ITR-1 (Sahaj) cannot be used if you have crypto income.
📋 ITR-2 (Recommended)
Use ITR-2 if you are an individual/HUF with:
- Salary income + crypto gains
- Capital gains from any source
- Income from other sources (crypto)
- No business/professional income
📋 ITR-3
Use ITR-3 if you have:
- Business/professional income
- Crypto trading as business
- Partnership firm income
- Presumptive taxation scheme
Where to Report Crypto Income in ITR
ITR-2 Schedule: Income from Other Sources
Step 1: Navigate to "Income from Other Sources"
In ITR-2, go to Schedule OS (Other Sources) → Add a new entry for Virtual Digital Asset income.
Step 2: Enter Gross Amount
Enter the total sale consideration (gross amount received from all crypto sales during the year).
Step 3: Enter Deductions
Enter only the cost of acquisition. Remember: no other expenses are allowed as deductions.
Step-by-Step ITR Filing Process
🔢 Step 1: Calculate Total Crypto Income
Example Calculation:
- • Total sales during FY 2023-24: ₹15,00,000
- • Total cost of acquisition: ₹10,00,000
- • Taxable income from crypto: ₹5,00,000
- • Tax @ 30%: ₹1,50,000
📝 Step 2: Gather Required Documents
Primary Documents:
- • Form 16 (if salaried)
- • Bank statements
- • Exchange transaction history
- • TDS certificates (Form 16A)
Supporting Records:
- • Detailed transaction log
- • Purchase/sale receipts
- • Fair market value proof
- • Wallet transfer records
💻 Step 3: Online Filing Process
- Login to Income Tax e-filing portal (incometax.gov.in)
- Select appropriate ITR form (ITR-2 or ITR-3)
- Fill personal information and basic details
- Enter salary income (if applicable) in appropriate schedule
- Go to "Income from Other Sources" schedule
- Add Virtual Digital Asset income entry
- Enter gross amount and cost of acquisition
- Proceed to TDS section and enter TDS details
- Calculate tax liability and verify
- Submit and generate acknowledgment
Claiming TDS Credits
🔄 TDS Credit Process
Schedule TDS - Enter TDS Details
In the TDS schedule, add entries for each TDS certificate:
- • TAN of the deductor (exchange/buyer)
- • TDS certificate number
- • Date of deduction
- • Amount of TDS deducted
- • Gross amount on which TDS was deducted
✅ Automatic Adjustment
The system will automatically adjust TDS credits against your tax liability. If TDS > tax due, you'll get a refund. If TDS < tax due, you'll need to pay the balance.
Common Scenarios and Examples
Scenario 1: Salaried + Crypto Gains
ITR Form: ITR-2
Crypto tax: ₹90,000 (30% of ₹3,00,000)
Scenario 2: Crypto Trading Business
ITR Form: ITR-3
Tax rate: Slab rate (not 30% flat rate)
Important Deadlines and Compliance
📅 Key Deadlines
- ITR Filing: July 31st (for individuals without audit)
- Advance Tax: Quarterly payments if tax liability > ₹10,000
- TDS Certificates: Must be obtained before filing
- Late Filing: ₹5,000 penalty + interest on unpaid tax
⚠️ Common Mistakes to Avoid
- Using ITR-1 when you have crypto income
- Not reporting small transactions or airdrops
- Forgetting to claim TDS credits
- Mixing up business income vs capital gains treatment
- Not maintaining proper supporting documents
💡 Professional Tip
If your crypto transactions are complex (multiple exchanges, DeFi activities, NFTs), consider hiring a chartered accountant familiar with crypto taxation. The cost of professional help is often much less than potential penalties for incorrect filing.
📚 Next Chapter Preview
In the final chapter, we'll explore VDA gift taxation, mining income, staking rewards, and advanced scenarios including unexplained assets provisions.