Tax on Crypto Mining & Staking Rewards in India

Two Separate Taxable Events

When you mine cryptocurrency or earn staking rewards, there are two distinct taxable events under Indian tax law, and conflating them is the most common mistake crypto investors make:

1. Receipt of the mined/staked tokens - taxed as income at the time you receive them, based on their fair market value (FMV) on that date
2. Sale or transfer of those tokens later - taxed under the Virtual Digital Asset (VDA) regime at a flat 30% on the gain, computed as sale price minus the FMV already taxed at receipt

Taxation at the Time of Mining/Staking (Receipt)

The Income Tax Department's position, consistent with how other forms of 'income in kind' are treated, is that mined coins and staking rewards represent income at the time of receipt, valued at their fair market value on that date. The classification of this income depends on the nature of the activity:

The Second Taxable Event: Selling the Mined/Staked Coins

Once you've paid tax on the FMV of the coins at receipt, that FMV becomes your cost of acquisition for those coins going forward. When you eventually sell, swap, or spend those coins, the gain (sale price minus this cost of acquisition) is taxed under Section 115BBH at a flat 30% rate (plus 4% cess, plus surcharge if applicable).

1% TCS Under Section 194S

If the mined or staked coins are sold on an Indian exchange, the exchange deducts 1% TDS under Section 194S on the transaction value at the time of sale, regardless of whether the sale results in a profit or loss. This TDS can be claimed as credit against your final tax liability.

No Loss Set-Off Available

A critical restriction under the VDA regime applies equally to mining and staking: losses from one VDA cannot be set off against gains from another VDA, and VDA losses cannot be set off against any other head of income (salary, business income, etc.). This means if your staking-derived coins are sold at a loss relative to their FMV at receipt, that loss cannot reduce your tax on mining income from a different cryptocurrency or any other income.

Mining Hardware and Electricity Costs

If mining is classified as a business, expenses like electricity, mining rig depreciation, and hosting fees may be claimed as business expenses against mining income (taxed at slab rate under PGBP). However, no deduction for these expenses is permitted against the eventual 30% VDA capital gains tax on selling the mined coins - the VDA regime under Section 115BBH only allows deduction of the 'cost of acquisition', which in this case is the FMV already taxed at receipt.

Record-Keeping is Essential

• Record the date and FMV (in INR) of every mining/staking reward received - this becomes both your taxable income at receipt and your cost basis for later sale
• Maintain exchange statements showing 194S TCS deductions
• For business-classified mining, maintain expense records (electricity bills, hardware purchase invoices, depreciation schedules)
• Report mining/staking income under the appropriate head (PGBP or Other Sources) and VDA sale gains separately in Schedule VDA of the ITR