Bitcoin at $118,000: Navigating Your Crypto Taxes in India for ITR 2025
July 11, 2025 Update: Bitcoin has soared to an incredible new all-time high, trading at an astonishing $118,055 (over ₹1 crore)! This marks a phenomenal 90% jump since July 11, 2024.
While investing in Bitcoin and other cryptocurrencies comes with significant risks and they are not recognized as regulated assets by Indian financial authorities, if you’ve realized gains from your Bitcoin investments in India, understanding the tax implications and how to report them in your Income Tax Return (ITR) is crucial. Let’s break it down.
How is Income from Bitcoin Taxed in India?
For taxation purposes, Bitcoin (and other cryptocurrencies) are categorized as Virtual Digital Assets (VDAs). Here’s what you need to know about their tax treatment:
1. Flat 30% Tax on Income from Transfer: Under Section 115BBH of the Income Tax Act, any income generated from the transfer (sale, exchange, etc.) of Bitcoin is subject to a flat tax rate of 30%.
- What’s Taxed? This 30% tax applies to your net income, which is calculated as:
- Sale Consideration – Cost of Acquisition
- No Deductions Allowed: You cannot claim any deductions for expenses (like transaction fees) other than the actual cost of acquiring the Bitcoin.
- No Loss Set-Off or Carry Forward: Crucially, any loss incurred from the transfer of VDAs like Bitcoin cannot be adjusted against any other income, nor can it be carried forward to offset income in future years.
Example: Let’s say you bought Bitcoin for ₹10,00,000 and sold it for a 90% profit.
- Cost of Acquisition (A): ₹10,00,000
- Sale/Transfer Amount (B): ₹10,00,000 + (90% of ₹10,00,000) = ₹19,00,000
- Income from Transfer (B – A): ₹9,00,000
- Tax to be Paid: 30% of ₹9,00,000 = ₹2,70,000
2. Bitcoin Gifts are Taxed in the Hands of the Recipient: If you receive Bitcoin as a gift or free transfer, special rules apply:
- If the Fair Market Value (FMV) of the Bitcoin received exceeds ₹50,000, the entire FMV will be taxed at 30% in your hands as VDA income. (Exceptions apply for gifts from specified relatives or on certain occasions like marriage).
- If you acquire Bitcoin for a price lower than its FMV, and the difference between the FMV and your payment is over ₹50,000, this difference will be taxed at 30% as VDA income.
Examples:
- Gifted Bitcoin: Received Bitcoin worth ₹1,00,000 for free. ₹1,00,000 will be taxable at 30% in your hands.
- Underpriced Purchase: Purchased Bitcoin for ₹1,00,000, but its FMV was ₹1,90,000. The difference of ₹90,000 will be taxable at 30% in your hands.
How to Report Your Bitcoin Income in ITR 2025
For the Financial Year 2024-25 (Assessment Year 2025-26), the Income Tax Return forms include a dedicated section for Virtual Digital Assets.
- Select the Correct ITR Form:
- Typically, if you have income from Bitcoin (VDA) gains, you will need to file ITR-2 (for individuals not having business/professional income) or ITR-3 (for individuals with business/professional income).
- ITR-1 (Sahaj) and ITR-4 (Sugam) generally do not support reporting VDA income, so they are not suitable.
- Fill Out Schedule – Virtual Digital Assets (VDA): The chosen ITR form will feature a specific “Schedule – Virtual Digital Assets (VDA)”. Here, you must accurately disclose the following details:
- Date of acquisition and date of sale of Bitcoin.
- Cost of acquisition (what you paid for it).
- Consideration received from the sale of Bitcoin.
- The tax payable at 30% will be calculated based on your reported income, without any further deductions.
Pro-Tip: Maintain meticulous records of all your Bitcoin transactions, including dates, acquisition costs, and sale proceeds. This will streamline the process of accurately filling out your ITR and ensure compliance with tax regulations. The Income Tax Department is increasingly focused on VDA transactions, making accurate reporting more important than ever.