Crypto investors in India must report gains in the Virtual Digital Asset schedule while filing income tax returns. The Income Tax Department treats cryptocurrencies as virtual digital assets. Any income from these assets is taxed at a flat rate of 30%. In addition, 1% tax is deducted at source on every transaction. These details are visible in the Annual Information Statement and Taxpayer Information Summary.
Salaried taxpayers who invest in cryptocurrencies should file ITR 2. This form is meant for individuals and Hindu Undivided Families who earn income from salary, house property, capital gains or other sources but do not have business income. It is suitable when crypto is held as an investment along with salary or other non business income. However, it cannot be used if income comes from a partnership firm.
Taxpayers who treat crypto trading as a business or who earn professional income must file ITR 3. This form is required for individuals and Hindu Undivided Families with business or professional income. It also applies to those engaged in intraday trading, futures and options or professional receipts. Experts advise that the choice of form depends on the overall nature of income and not only on crypto gains. Filing the correct form ensures compliance and avoids future disputes.