Crypto / VDA Tax Reporting: What Investors Should Not Ignore
A VDA reporting workflow covering every transfer, INR conversion, exchange fees, wallets, TDS, Schedule VDA, prohibited loss set-off and the 1 April 2026 form transition.
A wallet balance does not calculate taxable income. Tax reporting follows each transfer and its supported cost.
India’s Income-tax Act, 2025 took effect on 1 April 2026. The 1961 Act continues to govern tax years beginning before that date. Therefore, FY 2025–26 and AY 2026–27 remain governed by the 1961 Act, while tax year 2026–27 beginning 1 April 2026 is governed by the 2025 Act. A notice, return, payment or form must be analysed under the law applicable to the relevant tax year and event—not merely the date on which the portal communication is received.
Under the old Act framework for FY 2025–26, VDA transfer income is subject to the special section 115BBH regime and transfer TDS under section 194S.
The official ITR guidance states that VDA gains are reported transaction-wise in Schedule VDA and taxed at the special rate, with the statutory loss restrictions.
Form 26QE applies to specified old-Act transactions up to 31 March 2026, while Form 141 Schedule D applies to relevant individual/HUF VDA TDS events from 1 April 2026.
What the taxpayer should understand
- India’s Income-tax Act, 2025 took effect on 1 April 2026. The 1961 Act continues to govern tax years beginning before that date. Therefore, FY 2025–26 and AY 2026–27 remain governed by the 1961 Act, while tax year 2026–27 beginning 1 April 2026 is governed by the 2025 Act. A notice, return, payment or form must be analysed under the law applicable to the relevant tax year and event—not merely the date on which the portal communication is received.
- Under the old Act framework for FY 2025–26, VDA transfer income is subject to the special section 115BBH regime and transfer TDS under section 194S.
- The official ITR guidance states that VDA gains are reported transaction-wise in Schedule VDA and taxed at the special rate, with the statutory loss restrictions.
- Form 26QE applies to specified old-Act transactions up to 31 March 2026, while Form 141 Schedule D applies to relevant individual/HUF VDA TDS events from 1 April 2026.
- Exchange statements can omit self-custody wallets, peer-to-peer transfers, airdrops, staking or foreign-platform activity.
- Gross sale value in Form 26AS/AIS should not be confused with taxable gain.
The five-point review
| Check | What to examine |
|---|---|
| Event | Sale, swap, spend, gift, mining, staking or receipt. |
| Asset | Token, NFT or other VDA. |
| Cost | Acquisition evidence and permitted deduction. |
| TDS | Exchange/deductee record and relevant form. |
| Return | Transaction-wise Schedule VDA and tax-year transition. |
Practical example
An investor swaps one token for another without receiving rupees. The swap can still be a transfer requiring valuation and gain computation; the wallet history and exchange rate at the event should be preserved.
How to apply the framework
Build a unified ledger across every exchange and wallet, including transfers between own wallets to avoid double counting.
Do not net one VDA loss against another gain where the statutory restriction prohibits it.
Tax-control workflow
Fix the period, governing Act and portal document
Identify the financial year, assessment year or tax year, the date of the underlying event and the statutory document. A communication received after 1 April 2026 may still concern a year governed by the 1961 Act. Record event, asset and cost before preparing the response or return.
Reconcile the portal with primary evidence
Start from contracts, certificates, bank statements, broker or property records, foreign statements and prior filings. Then reconcile AIS, TIS, Form 26AS, the return, tax payments and notices. Portal information is a powerful control but can contain gross values, duplicates, timing differences or reporting-entity errors.
Submit through the correct route and retain proof
Use the specific service—return filing, AIS feedback, e-Proceedings, rectification, refund reissue, Form 67, appeal or grievance—rather than uploading the same explanation everywhere. Preserve the filed form or response, computation, annexures, transaction ID, acknowledgement and subsequent portal status.
Implementation checkpoint
Before closing the task, verify the live portal outcome rather than relying only on a submission message. Confirm whether the return is verified, the feedback is recorded, the tax credit changed, the refund was reissued, the notice response shows a transaction ID, the demand was adjusted or the appeal was registered. Record the next deadline and unresolved amount.
Action checklist
- Export exchange histories.
- Collect wallet addresses and transaction hashes.
- Classify every transfer.
- Reconcile TDS and gross consideration.
- Compute transaction-wise income.
- Use old or new TDS form by event date.
Evidence to keep
- Exchange CSVs
- Wallet and blockchain records
- INR valuation source
- Form 26AS/AIS and TDS forms
- Schedule VDA working
Warning signs
- Only year-end balance used
- Swaps ignored
- Foreign exchange omitted
- Losses netted automatically
- Form 26QE used for post-April 2026 event
Finin2min takeaway
Income-tax compliance is evidence management under the correct year and statute. The return, portal data, computation, bank trail and source documents should reconcile before a notice arrives.