Around 20 million people in India have hopped on the crypto bandwagon - making it one of the most popular investments for 2023. If you want a slice of the Bitcoin pie, here’s how to buy crypto in India… and what you need to know for your taxes.
The Income Tax Department (ITD) is clear that all income earned from crypto is taxable as per the Income Tax Act. Not only this, but the ITD has been proactively issuing tax demand notices to negligent investors.
In other words, it’s very important to report your crypto gains and income accurately and pay any taxes due to avoid future penalties.
Despite this, due to a lack of legislative clarity on crypto tax from the ITD, many investors are unaware of how to calculate their crypto gains and income, nor which tax form they need to use to file and what details they need to include.
Don’t panic, we’ve got the answers to all your questions. Here’s our step by step guide on how to report crypto to the ITD in less than 10 minutes!
Want to understand how crypto is taxed in India first? Our India Crypto Tax Guide 2023 will get you up to speed fast.
The first step in filing your India crypto taxes is to sign up or log in to Koinly and check that you have connected all the exchanges, wallets, or blockchains you use. You can find out more on getting set up with Koinly here.
Still in Koinly, go to the tax reports page, scroll down, and under the option “pick a report type”, select Complete Tax Report and download it. We’ll be referring to figures from this report in later steps.
You should also ensure you've selected the beginning of the financial year as 1 April. You can change this by going to settings, and then amending your portfolio settings in Koinly.
Now that you have your Koinly Complete Tax Report which contains details of all your crypto profits - including gains and income - you can get started with filing your crypto taxes.
Note: This guide will cover filing the ITR-2 Form. This form is applicable to all taxpayers with capital gains except those with business income or taxpayers who are a partner in any firm. Taxpayers with business income need to use the ITR-3 Form instead.
The third step is to log in to the Income Tax Portal. If you are filing the tax return for the first time, you will need to register on the Income Tax Portal. You can find the steps for registering here.
On the home page, click on e-file, then income tax returns, then file income tax returns.
Select assessment year as 2023-24 (Current AY for FY 2022-23) and select mode of filing as online and then select continue.
Click on start new filing and on the next page select status as individual and select continue.
Now under the heading, I know which ITR Form I need to file, select ITR-2 and proceed to the next page and click on let’s get started.
Select the reason for filing ITR (this will depend on your personal circumstances) and click on continue. On the new page, select continue and fill in the basic personal details.
Before we proceed to the next steps, we'll take a quick look at an example of Koinly’s Complete Tax Report. You may need the capital gains summary section, other gains section, income summary section, and expenses section of your report.
You can use these figures to fill out your ITR-2. Capital gains will be disclosed in Schedule Capital Gains and Other Income will be disclosed in Schedule Income from Other Sources.
Here's an example of a capital gains and other gains summary from a Koinly Complete Tax Report:
While here's an example of an income summary and expenses summary from a Koinly Complete Tax Report:
Step 4 is to navigate to the Schedules Summary screen and select Schedule Capital Gains.
Under the heading please select the type of capital assets as “Virtual Digital Assets” in order to continue.
On the next page, you will need to enter the date and transaction details as required in Schedule VDA.
You then need to fill out the Schedule VDA with the details below:
When you’re done, select continue. You’ve now completed this section.
Step 5: On the Schedules Summary screen, select Schedule Income from other sources and select Gross income chargeable to tax at normal applicable rates and then + Add details
For nature of income, select Any other Income and click on Add. On the next page in point (iv) enter the nature of Income as Crypto Income and enter the amount (Use the Total Figure from the Income summary section of the Complete Tax Report)
As you can see in our example, our Other Income is RS478,909. Once you’ve entered your figure, select add and then Confirm the schedule.
Once the above schedules are entered and confirmed, check other schedules and fill them as per your income and deductions for the year as applicable to your circumstances.
The final step is to click on proceed for verification. Here, you can preview the completed ITR and once you’re happy with it, submit your ITR.
Once ITR is submitted you will need to e-verify it by requesting OTP to your mobile number linked to your Aadhaar card. Once the return is e-verified, your return is successfully filed.
While the task of preparing your crypto taxes can seem quite daunting - especially if you traded on multiple exchanges - there are tools like Koinly which can make your life really easy when it comes to tax time.
Koinly does a number of things under the hood in order to calculate your capital gains and income. First, it fetches the market rates at the time of your trades, then it matches transfers between your wallets and exchange accounts and finally, it calculates your capital gains, income, expenses, and more to give you a complete picture of your tax position
Most Indian exchanges have APIs that can allow Koinly to download your transaction history automatically. You can also import CSV files of your transaction history if you prefer that (or if your exchange does not have an API).
You can set up Binance India, WazirX, and CoinDCX in minutes using read-only APIs. For other exchanges like Bitbns, Zebpay, Unocoin, Vauld, CoinSwitch, and so on. you can download the CSV file and upload it to Koinly. The whole process takes less than 5 minutes and you will be ready with a tax summary from Koinly
Your base currency should be INR. The pre-selected cost-basis method is FIFO, which is correct and is a permissible cost basis method as per the ITD's requirements, but you can also use the weighted average cost basis method as an individual investor. The Indian tax year runs from April 1 to March 31 of the following year, so make sure your settings reflect this. And remember, you need to file before the 31st of July.
Check out your tax summary to ensure it looks correct. Any issues? Chat with us.
Koinly offers many downloadable tax reports. For India, the report you need to download is the Complete Tax Report.