ITR for crypto income: which form, which head, and the mistakes that trigger notices

Crypto income is reported in Schedule VDA, which sits in ITR-2 and ITR-3. Use ITR-2 if you have no business or professional income, and ITR-3 if you do, including if you treat frequent crypto trading as a business. You cannot use ITR-1 if you have any income from transferring a virtual digital asset. Every sale, swap and spend goes in as its own row, the gain is taxed at a flat 30% plus surcharge where applicable and 4% cess, and the 1% TDS deducted on your sales is claimed in the tax-paid section.

The mistakes that cause trouble are almost always the same: using ITR-1, leaving out small or losing sales, netting losses against gains, and forgetting to claim TDS. With exchanges now reporting more of your activity directly, the real job is making your return match what the department already knows. This guide is for anyone who filed this year, filed wrong, or has not filed yet.

The department sees more of your trades than ever

I co-founded Unocoin in 2013. Since then I have watched the reporting net tighten, one step at a time.

The 1% TDS, in place since July 2022, put every sale on Indian platforms into your Form 26AS. Then in late July 2026 the CBDT issued guidance on the Crypto-Asset Reporting Framework, under section 509 of the Income-tax Act, 2025 and Rules 241 to 244. Exchanges will report users' transactions from calendar year 2026 in rupees, in Form 167, by 31 May of the following year: acquisitions, disposals, crypto-to-crypto trades and transfers, including aggregated transfers to wallets they cannot identify.

This is not a new tax and it is not a new filing duty for you. But it does mean that your return will be compared against much richer data. Coverage of FIU-IND's 2024-25 annual report noted that tax authorities identified about ₹888.82 crore of undisclosed VDA income. Matching your ITR to your statements is the whole game now.

ITR-2 or ITR-3

• ITR-2: you have no income from business or profession. Most salaried people who bought and sold some Bitcoin as an investment will use this form.
• ITR-3: you have business or professional income. That includes people who treat crypto trading as a business.
• ITR-1: not allowed if you have VDA income. If you filed ITR-1 and sold crypto during the year, talk to a CA about correcting it.

Due dates for the 2026-27 assessment year were 31 July 2026 for ITR-2 filers and 31 August 2026 for non-audit ITR-3 filers. For audit cases, the CBDT moved the ITR due date from 31 October to 21 November 2026.

Capital gains or business income

Schedule VDA asks you to pick the head under which each transfer is taxed: capital gains or business income. The 30% rate under section 115BBH applies to income from VDA transfers either way, and the same restrictions apply: only cost of acquisition is deductible, and losses cannot be set off or carried forward.

So why does the head matter? Because it decides which ITR form you use, how your other income is treated, and what records you need. The answer depends on facts: how often you trade, how long you hold, whether trading is your occupation, and how you have treated it in past years. There is no single test I can give you here. Decide it with your CA, and be consistent.

Crypto futures and options are a separate problem. Commentary after Budget 2025 described their classification as uncertain. If you traded crypto derivatives, do not force them into Schedule VDA without professional advice.

Schedule VDA line by line

For each transfer, you enter:

1. Date of acquisition
2. Date of transfer
3. Head under which income is taxable
4. Cost of acquisition, the only allowed deduction
5. Consideration received, meaning the sale value
6. Income from transfer, meaning sale value minus cost

A "transfer" includes selling for rupees, swapping one crypto for another, and spending crypto. Every one of them needs a row, including the ones that made a loss. The loss will not reduce your tax, but leaving it out makes your return look incomplete next to platform data.

Then go to the tax-paid section and enter the TDS shown in Form 26AS, so it is credited. If your total TDS and other taxes paid exceed what you owe, the excess is refunded after processing. Our Schedule VDA guide has the full field reference.

Matching AIS and exchange statements

Before you file, or right now if you already have, do this check:

1. Download the full transaction statement from every platform you used during the financial year.
2. Log in to the income tax portal and open Form 26AS and your Annual Information Statement.
3. Match every sale on your statements to a TDS entry in 26AS, and every entry in AIS to a row in your Schedule VDA.
4. Look for anything in AIS you do not recognise. If an entry looks wrong, raise it with the platform and your CA.
5. Check that the TDS you claimed equals the TDS deducted.

A mismatch between your return and the data the department already holds is the easiest thing to spot. Clean it up before anyone else has to.

Mistakes that trigger questions

• Filing ITR-1 with crypto income
• Leaving out small sales, on the assumption that nobody will notice. AIS already shows platform data
• Netting losses against gains, or carrying a loss into next year
• Forgetting to claim TDS
• Reporting only rupee sales and missing crypto-to-crypto swaps
• Deducting fees or other expenses beyond the cost of acquisition
• Ignoring gifts or airdrops, which have their own rules

If you already filed: revised or belated returns

If you already filed but left out crypto, used the wrong form, or got the numbers wrong, the fix is usually a revised return. If you missed your due date entirely, a belated return may still be possible. The deadlines and consequences depend on your case and can change, so check the income tax portal and talk to a CA now rather than later.

Do not wait for a notice. Correcting a return yourself is a far better conversation than explaining one you were asked about. And never try to make crypto income disappear by moving it offshore or off the record. The Finance Act 2025 added VDAs to the undisclosed income that can be assessed in a search and seizure case, and the reporting net only gets tighter.

A note on the new Income-tax Act

The Income-tax Act, 2025 has applied since 1 April 2026 and renumbers many sections. The TDS rule that was section 194S is now in section 393 under the new Act, with the same 1% rate and thresholds. The return you filed this year covers the 2025-26 financial year, so your statements will mostly show the old numbering. Next year, expect new numbers on forms and certificates. The rules are carried over in substance, but check the current numbering with your CA.

Records to keep

• Platform transaction statements for every year you held or sold
• Bank statements showing rupee transfers to and from platforms
• Records of transfers between your own wallets, with dates and amounts
• Records of gifts and airdrops, with the value on the date received
• Each year's filed ITR, Form 26AS and AIS

Keep them for years. If a question ever comes, clean records turn it into an afternoon's work.

I am a co-founder of a Bitcoin platform, not a tax adviser, and everything here is the general rule as published. Check your own situation with a CA. But open the Schedule VDA guide today and compare it with what you filed. That one check is worth more than any tip I could give you.

Keep reading

Sources

• IndiaBitcoin Schedule VDA guide
• Angel One: AY 2026-27 ITR due dates
• Angel One: audit-case ITR due date moved to 21 Nov 2026
• Inc42: CBDT CARF guidance
• KPMG: India CARF implementation
• Cyril Amarchand: FIU-IND annual report 2024-25
• Business Today: Budget 2025 VDA changes
• Taxguru: taxation of VDAs
• TDSMan: section 393(1) and 194S
• Cleartax: ITR-2 and ITR-3 for crypto