Bitcoin’s $123,000 Milestone: Indian Investors Eyeing Profits & Tax Compliance

Bitcoin Surges Past $123,000: A Guide to Booking & Reporting Crypto Gains in India

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Bitcoin has hit a new all-time high, crossing the $123,000 mark, igniting excitement among over two crore crypto investors in India.¹ This massive rally, which has seen a ₹1 lakh investment in Bitcoin grow to over ₹12 lakh since July 2020, is being fueled by a confluence of factors.

Raj Karkara, COO of Zebpay, attributes Bitcoin’s 2025 surge to robust institutional adoption, evolving regulatory landscapes, and favorable macroeconomic trends.² “Major asset managers like BlackRock, Fidelity, Invesco, and Franklin Templeton are allocating significant capital to spot Bitcoin ETFs, positioning BTC as a core part of diversified investment strategies,” Karkara states.³ He also highlights the positive sentiment driven by regulatory clarity, particularly in the US, with developments like the GENIUS Act and improved custody frameworks bolstering the investment environment.

For Indian crypto investors looking to capitalize on these gains, understanding the process of booking profits and reporting them for tax purposes is crucial.

How to Book Your Cryptocurrency Gains in India:

The process of converting your crypto assets into Indian Rupees (INR) and withdrawing them to your bank account is typically a two-step procedure through a Financial Intelligence Unit (FIU)-registered exchange. Leading exchanges like ZebPay, CoinDCX, WazirX, CoinSwitch, Mudrex, and Unocoin are examples of FIU-registered platforms.⁴

Step 1: Sell Your Crypto Assets

• Log in to your chosen FIU-registered crypto exchange.
• Navigate to the trading section.
• Select the cryptocurrency you wish to sell (e.g., Bitcoin, Ethereum, Dogecoin).
• Execute the sale to convert your crypto into INR.
• Ensure your account is KYC (Know Your Customer) compliant, as this is mandatory for transactions.
• The proceeds will be credited to your wallet on the exchange.

Step 2: Withdraw INR to Your Bank Account

• Once the INR proceeds are visible in your exchange wallet, go to the withdraw/payout section.
• Select your linked bank account.
• Enter the amount you wish to withdraw.
• Complete the transaction, and the funds will be credited directly to your bank account.

“A 1% Tax Deducted at Source (TDS) is applied at the time of sale, and the net proceeds are credited to the investor’s account.⁵ Once the transaction is complete, the funds can be withdrawn directly to a linked bank account and used like any regular balance,” Karkara explains.

Reporting Cryptocurrency Gains in Your Income Tax Return (ITR):

The Indian government, through the Finance Act, 2022, classifies cryptocurrencies as Virtual Digital Assets (VDAs), subjecting them to specific tax rules.⁶

• 30% Flat Tax Rate: Any income arising from the transfer of VDAs (selling, trading, or swapping) is taxed at a flat rate of 30%, plus applicable surcharge and cess.⁷ This applies regardless of the holding period (short-term or long-term) or your income slab.
• Limited Deductions: The only permissible deduction when calculating taxable gains is the cost of acquisition. Expenses like transaction fees, mining costs, or other related charges are not deductible.
• No Loss Offset or Carry Forward: Losses incurred from VDA transactions cannot be set off against gains from other VDAs or any other income source.⁸ Furthermore, these losses cannot be carried forward to future assessment years.
• 1% TDS: As mentioned, a 1% TDS is levied on the sale of VDAs.⁹ For individuals and HUFs, this applies to transactions exceeding ₹50,000 in a financial year, while for other specified persons, the threshold is ₹10,000. This TDS can be claimed as a credit when filing your ITR, reducing your overall tax liability.
• Tax on Crypto Gifts: If you receive VDAs as a gift, their fair market value is considered taxable income in the hands of the recipient if the aggregate value of such gifts from a non-relative exceeds ₹50,000 in a financial year.¹⁰

Which ITR Form to Use:

When filing your ITR, you must report crypto gains under the Schedule VDA (Virtual Digital Assets) section. The appropriate ITR form depends on your overall income profile for the Financial Year 2024-25 (Assessment Year 2025-26):

• ITR-2: This form is generally for salaried individuals or pensioners who have income from crypto gains (treated as capital gains) and do not have income from “profits and gains of business or profession.”
• ITR-3: If you have income from a business or profession, in addition to crypto gains (especially if your crypto activity involves systematic and frequent trading, indicating a business activity), you should file ITR-3.

The Income Tax Department has released excel utilities for ITR-2 and ITR-3 for AY 2025-26, with an extended ITR filing deadline for non-audited cases until September 15, 2025.¹¹

Key Considerations for Investors:

While the crypto market offers lucrative opportunities, it’s essential to remember that it remains largely unregulated in India compared to traditional financial markets. Investors should exercise caution, maintain meticulous records of all their crypto transactions (including acquisition dates, cost, sale proceeds, and any TDS deducted), and consult with a tax professional to ensure accurate reporting and compliance with the evolving tax laws.