How to Report Crypto Income in ITR for AY 2026-27: Complete Filing Guide
Crypto gains look simple until tax season arrives. Then the confusion starts. Which ITR form applies? Where does Schedule VDA sit? Can losses offset other income? This guide answers all of it for AY 2026-27.
The Tax Rule You Cannot Avoid
Section 115BBH taxes every gain from a virtual digital asset at a flat 30%, plus 4% cess. The rate applies regardless of income slab or holding period. Selling crypto for a quick profit and holding it for three years attract the same rate.
Only cost of acquisition counts as a deduction. Exchange fees, gas fees and brokerage do not reduce your taxable gain. There are no exemptions under capital gains provisions here.
Losses Do Not Travel
A crypto loss cannot offset gains from stocks, mutual funds or property. It cannot even offset gains from a different crypto asset. Section 115BBH(2)(b) blocks any set-off across income heads.
Carry-forward is also off the table. If a coin dropped in value this year, that loss stays locked inside this financial year and disappears after that. Plan trades with this in mind, since timing losses against gains matters more in crypto than in equity.
Which ITR Form to Use
ITR-1 and ITR-4 do not accept crypto income. Choose between two forms instead.
ITR-2 fits investors who treat crypto as a personal investment and have no business income from trading.
ITR-3 fits active traders, or anyone with other business or professional income alongside crypto activity.
Filing under the wrong form invalidates the return. Check your trading pattern before choosing.
Schedule VDA: The Section that Trips up Most Filers
Both ITR-2 and ITR-3 carry a dedicated Schedule VDA. This is where every crypto transaction gets reported, one trade at a time. Aggregated totals get rejected during processing.
For each transaction, the schedule asks for:
- Date of acquisition
- Date of transfer
- Type of virtual digital asset
- Cost of acquisition
- Sale consideration
- Resulting income or loss
Skipping this schedule, or reporting only a lump sum, is one of the most common triggers for a tax notice.
Where TDS Fits into the Picture
Section 194S requires a 1% TDS deduction on most VDA transfers above ₹10,000 in a year, or ₹50,000 for specified persons. Indian exchanges deduct this automatically and report it to the tax department.
TDS is not your final tax bill. Treat it as an advance collection mechanism. You claim it as a credit against your actual 30% liability while filing.
P2P transactions and international platforms work differently. The buyer may need to deduct and deposit the TDS personally, so keep transaction records ready for this scenario.
Step-by-Step Filing Process
Step 1: Gather transaction data. Pull statements from every exchange used during the year, plus wallet records for P2P or DeFi activity.
Step 2: Reconcile with AIS and Form 26AS. Cross-check every TDS entry against what exchanges report. Mismatches invite scrutiny.
Step 3: Calculate gains transaction by transaction. Subtract cost of acquisition from sale consideration for each trade. Do not net gains and losses across different coins.
Step 4: Choose the correct ITR form. Base this on whether trading counts as business activity or personal investment.
Step 5: Fill Schedule VDA in full. Enter every transaction with its dates, cost, consideration and resulting figure.
Step 6: Claim TDS credit. Match the 1% already deducted against your final 30% liability.
Step 7: Pay advance tax if needed. Since VDA losses cannot offset other income, your liability from crypto gains stays isolated. Estimate this early to avoid interest under sections 234B and 234C.
Step 8: File before the deadline. ITR-2 filing for AY 2026-27 closes on July 31, 2026, with a belated filing window open until December 31, 2026.
The Cost of Getting it Wrong
The tax department actively uses AIS and exchange TDS data to flag under-reporting. Consequences include:
- 50% penalty on underreported income under Section 270A, rising to 200% for misreporting
- Interest under Sections 234B and 234C for advance tax shortfall
- Penalty equal to the TDS amount for exchanges or buyers who fail to deduct under Section 194S
- In serious cases, prosecution for non-deposit of TDS under Section 276B
None of this requires deliberate evasion. A missing Schedule VDA entry or an aggregated figure instead of transaction-wise detail is enough to draw attention.
A Quick Checklist Before You File
Before you file, run through this list once.
- Confirm ITR-2 or ITR-3 based on your trading activity
- Fill Schedule VDA with every transaction listed separately
- Reconcile TDS entries against AIS and Form 26AS
- Remember that losses stay locked within the VDA bucket
- Pay advance tax where liability crosses the threshold
- File before July 31, 2026, or use the belated window if needed
Crypto tax rules in India remain strict by design. Budget 2026-27 kept the 30% rate and 1% TDS unchanged, while adding stricter reporting norms for exchanges. Filing correctly the first time saves far more effort than correcting a notice later.
