Income Tax on Crypto:Updates in India’s 2025 Budget

India’s 2025 Budget keeps strict rules on income tax on crypto. Profits are taxed, transactions face deductions, and non-compliance can lead to heavy penalties. More types of crypto assets now fall under regulation.

This guide breaks down the latest updates, tax rules, and their impact on traders and investors.

Income Tax on Crypto Transactions—Remains the same as before

• 30% Tax on Profits – Any gains from selling crypto are taxed at a flat 30%.
• 1% TDS on Transactions – A 1% tax is deducted at the time of the transaction for:
  • Salaried individuals: Transactions above ₹10,000
  • Businesses: Transactions above ₹50,000

You can read the detailed breakdown of Crypto Taxation in India, here.

Reporting and Compliance Rules

One major change is that the government will make it mandatory for reporting entities(Crypto exchanges, businesses dealing with Crypto) to furnish information with regards to transactions of crypto assets.

Improperly reported crypto holdings can be taxed as undisclosed income, leading to penalties of up to 70%. 

Additionally, the definition of Virtual Digital Asset (VDA) under Section 47A will be modified to include:

• All crypto assets using blockchain technology
• Tokens previously excluded from taxation

Income Tax on Crypto Derivatives (Futures & Options)

Classified as Business Income – Profits from crypto derivatives (futures, options) will be taxed based on an individual’s regular income tax rate, not the 30% crypto gains tax.

However, it is not clear if Crypto Futures & Options transactions will be considered as Virtual Digital Assets or not.

Impact on the New Income Tax on Crypto Traders & Investors

• Higher Compliance Requirements – Stricter reporting rules and higher taxes may impact profits.
• Possible Shift to the Digital Rupee – Traders may prefer the government-backed CBDC over private cryptocurrencies.
• Rise in Offshore & Self-Custody Solutions – Strict compliance rules and the inability to offset losses may push high-volume traders toward non-FIU-compliant offshore exchanges or self-custody wallets.

Conclusion

India is working to bring more accountability to crypto transactions. The government’s push for clear and mandatory income tax on crypto is a positive move towards greater transparency and regulation in the sector. 

While the increased compliance burden may affect traders and investors, these steps also create a more structured environment for crypto investments. The expansion of crypto asset regulations and the potential growth of the Digital Rupee could reshape crypto trading in India, offering a more secure space for market participants.

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