Cryptocurrency and Digital Asset Taxation

Digital assets such as cryptocurrencies are treated differently than traditional financial instruments in most jurisdictions, including India. In the Union Budget 2022, the Indian government formally recognized cryptocurrencies and introduced a taxation regime under Section 115BBH of the Income Tax Act. According to this provision, any income arising from the transfer of a virtual digital asset (VDA) is taxable at a flat rate of 30%, with no deductions allowed except the cost of acquisition. Moreover, a 1% Tax Deducted at Source (TDS) under Section 194S is applicable on transfers exceeding a prescribed threshold. These legal provisions have created the need for proper accounting, categorization, and reporting of cryptocurrency transactions to avoid tax notices, penalties, or legal entanglements.

At Xpress Consultancy, we assist clients in understanding and complying with the tax rules applicable to their digital asset holdings. Our consultancy begins with an in-depth assessment of the client’s activities—whether they are buying and holding crypto as an investment, actively trading on exchanges, earning through staking or mining, receiving airdrops, transacting in NFTs, or engaging in DeFi protocols. Each of these activities may be taxed differently based on the nature of the income (capital gains, business income, or other income), the holding period, and the source of acquisition. We provide clarity on classification, computation of income, and tax planning strategies to minimize liability within the bounds of law.

One of the key challenges in crypto taxation is record-keeping. Since digital assets can be transacted across multiple exchanges, wallets, and platforms, often with price volatility and foreign exchange involvement, accurate bookkeeping becomes essential. At Xpress Consultancy, we help clients consolidate their transaction history across domestic and international exchanges, compute fair market values, apply relevant tax rules, and prepare reconciled ledgers for filing income tax returns. We also work with accounting tools and blockchain explorers to verify data authenticity and ensure audit-proof records.

For active traders and crypto professionals, frequent transactions—such as buying and selling across various tokens, arbitrage between platforms, or derivatives trading on crypto exchanges—can complicate tax calculations. We offer customized tax advisory and computation models to manage high-volume trading activity while ensuring that tax reporting remains transparent, consistent, and optimized. We help assess whether your trading constitutes business income (subject to slab rates) or capital gains (subject to 30% flat rate), and advise accordingly to align tax positions with legal interpretations and CBDT clarifications.
Another area where we add value is advising on mining, staking, and airdrop income. In India, mining and staking rewards are treated as taxable income in the year of receipt. Our consultancy includes assistance in evaluating mining costs (hardware, electricity, software), computing fair value of coins received, and applying the correct head of income. For airdrops and rewards earned from decentralized finance (DeFi) platforms, we guide clients in determining taxability on receipt versus realization, depending on specific transaction nature and holding intent.

NFT (Non-Fungible Token) taxation is another emerging area we specialize in. NFTs, often linked to art, music, gaming, or collectibles, are unique assets whose value and ownership are secured by blockchain. With marketplaces like OpenSea and WazirX NFT gaining popularity, creators and buyers alike are now facing tax obligations. We help creators compute income on NFT sales, advise on GST applicability where relevant, and assist buyers in understanding the tax implications of trading or reselling NFTs for profit.

A critical component of our service is compliance and reporting support. We guide clients through correct tax filing methods, ensuring that digital asset income is declared in the appropriate sections of their income tax return. We also help calculate and deposit advance tax, ensure correct TDS accounting (especially where clients are recipients of crypto payments), and respond to notices or queries raised by the Income Tax Department or other regulatory bodies. For businesses and startups operating in the blockchain or crypto domain—whether offering services, exchanges, or platforms—we offer corporate tax planning, GST analysis, cross-border transaction structuring, and transfer pricing advisory.

As regulatory scrutiny grows globally, international tax implications of crypto transactions are becoming increasingly significant. Many Indian investors trade on offshore exchanges or receive payments in foreign digital wallets. We assist clients in determining residency-based tax obligations, foreign asset disclosure under Schedule FA, and reporting in compliance with FEMA and RBI guidelines. We also support clients in avoiding double taxation by evaluating applicability of Double Taxation Avoidance Agreements (DTAAs), especially where capital gains arise from foreign platforms.

We also recognize the risks of misreporting or non-reporting of digital asset transactions, which can invite scrutiny, interest, and penalties under various provisions of the Income Tax Act. Our approach is proactive, not reactive—we help you stay ahead of the curve by maintaining clean records, making accurate declarations, and anticipating changes in law or interpretation. We also provide tax planning strategies, such as identifying eligible loss harvesting opportunities within allowed limits, optimizing transaction timing, and maintaining separate books for digital asset activity to avoid compliance risk.

At Xpress Consultancy, our mission is to demystify cryptocurrency taxation and empower clients with the right tools, knowledge, and strategies. We combine legal insight, financial expertise, and technology to ensure our clients can participate in the digital asset economy without fear or confusion. Whether you are a crypto investor, trader, NFT artist, blockchain startup, or just exploring the space, our consultancy offers reliable, updated, and practical solutions tailored to your unique tax profile.

As the digital economy expands, taxation laws will continue to evolve. We keep a close eye on policy developments, CBDT notifications, RBI circulars, and international trends to ensure our clients are always compliant and well-informed. Cryptocurrency is not just the future of finance—it is already shaping today’s tax frameworks. And with Xpress Consultancy by your side, you can embrace that future with confidence, clarity, and compliance.