Introduction
India’s cryptocurrency community continues to expand, but so does the confusion around taxation. One of the most frequently asked questions is:
“If I only bought and held cryptocurrency — without selling it — do I need to pay tax or file my Income Tax Return (ITR)?”
In this guide, we address this concern in detail by:
- Clarifying the law
- Explaining taxable events
- Analyzing case-based scenarios
- Helping you determine whether and how to file ITR correctly
Let’s decode the law for Virtual Digital Assets (VDAs), so you don’t invite unnecessary notices or miss compliance deadlines.
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Legal Framework Governing Crypto Taxation in India
Definition of Virtual Digital Assets – Section 2(47A)
From April 1, 2022, the Income Tax Act defines cryptocurrency, NFTs, and similar assets as “Virtual Digital Assets (VDAs)”. This classification includes:
- Bitcoin, Ethereum, Solana, etc.
- Non-fungible tokens (NFTs)
- Digital representations of value that can be transferred or traded electronically
Tax on Transfer of VDA – Section 115BBH
Effective FY 2022–23, any income from the transfer of VDAs is taxed at a flat 30% rate.
Key features:
- No deductions allowed (except the cost of acquisition)
- No loss set-off across income heads
- No carry-forward of crypto losses to future years
This applies whether you are a regular trader, long-term holder, or even a one-time seller.
TDS on Crypto Transfers – Section 194S
Tax Deducted at Source (TDS) of 1% applies to crypto transactions if:
- Transaction value exceeds ₹10,000 in a financial year (₹50,000 for specified persons like salaried individuals)
Most exchanges like CoinDCX, CoinSwitch, WazirX, and Binance deduct TDS automatically and reflect it in your Form 26AS or AIS.
https://cleartax.in/s/cryptocurrency-taxation-guide, +919778318604
Are You Taxable for Merely Holding Crypto?
No. Just holding crypto does not trigger any tax liability.
If there is no sale, swap, gift, or conversion of crypto during FY 2024–25, then:
- No income arises
- Section 115BBH is not triggered
- You don’t need to report it in the ITR, unless you hold it in a foreign wallet or have other reasons to disclose
However, if your total income exceeds the basic exemption limit, you still need to file an ITR — even if the crypto was only held, not sold.
Tax Implications by Activity Type
Crypto Activity | Taxable? | ITR Disclosure Required? |
Buying and Holding | No | No (unless foreign wallet) |
Selling crypto for INR | Yes (30%) | Yes (Schedule VDA, ITR-2) |
Converting crypto to another | Yes (30%) | Yes (Schedule VDA) |
Using crypto to buy goods/services | Yes (30%) | Yes |
Receiving crypto as a gift | Yes (if > ₹50,000 from non-relative) | Yes (under “Other Income”) |
Earning crypto via mining/staking | Yes | Yes (ITR-3 or ITR-2) |
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Real-World Scenarios
Scenario 1: Only Holding Crypto (Investor)
Riya purchased ₹1.2 lakh worth of ETH in May 2023. She did not sell, trade, or transfer any of it.
- Tax: None
- ITR Filing: Required only if her total income exceeds ₹3 lakh (under new regime)
- Crypto Disclosure: Not required
Scenario 2: Trading and Realized Gains
Amit sold BTC worth ₹3 lakh in Nov 2023, earning ₹80,000 profit.
- Taxable @ 30% under Section 115BBH
- TDS @ 1% likely already deducted by exchange
- ITR: File ITR-2 and report in Schedule VDA
- Verification: Check Form 26AS for TDS credit
Scenario 3: Conversion Between Cryptos
Sagar purchased BTC for ₹50,000 and converted it into ETH (worth ₹55,000) in Jan 2024.
- This is treated as a taxable transfer under Section 115BBH
- Gain of ₹5,000 taxed @ 30%
- ITR: Must report in ITR-2
Scenario 4: Crypto Gift Received
Priya received crypto worth ₹30,000 from a non-relative.
- As the value is below ₹50,000, it’s not taxable under Section 56(2)(x)
- No ITR disclosure required unless sold
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Which ITR Form Should You Use?
Situation | Use ITR | Notes |
Only salary income, no crypto transaction | ITR-1 | No VDA activity to disclose |
Sold or transferred crypto | ITR-2 | Use Schedule VDA |
Crypto mined or received via business/staking | ITR-3 | Considered business income |
Crypto in foreign wallet | ITR-2 | Must fill Schedule FA |
Special Case: Crypto in Foreign Wallet or Exchange
If you store crypto in platforms like Coinbase, Binance, Kraken, or any wallet hosted outside India:
- Report the holding under Schedule FA (Foreign Assets) in ITR
- Applies even if no sale was made
🛑Failing to disclose foreign assets can lead to penalties under the Black Money Act.
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Conclusion: Know When You’re Taxable — and When You’re Not
You are not taxed for just holding crypto in your wallet, whether Indian or foreign.
But once you transfer, sell, convert, or use that crypto, it’s considered a taxable event under Section 115BBH.
Stay compliant by:
- Choosing the correct ITR form
- Reporting gains in Schedule VDA
- Declaring foreign holdings (if any)
- Verifying TDS credits via Form 26AS/AIS
Thanks for the reading
Got a doubt or a personal tax situation to discuss? Drop it in the comments below – our tax experts respond regularly.
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