India’s July 31, 2026 income tax return deadline is drawing attention to how crypto investors in India must report virtual digital asset activity. Under the current framework, transactions involving cryptocurrencies, NFTs and some other digital assets fall under a separate regime that carries a flat 30% tax on profits from transfer or sale, along with 1% tax deducted at source on transfers above the prescribed threshold.

The rules have been in place since 2022, but the filing season is highlighting that many investors may still be unclear on what needs to be disclosed. The source article says incomplete or incorrect reporting can lead to notices or penalties, making accurate disclosure under the dedicated Schedule VDA section especially important for the Assessment Year 2026-27.

Separate regime for virtual digital assets

India brought cryptocurrencies and other virtual digital assets, or VDAs, into a specific tax framework in 2022. Under that regime, profits from selling or transferring crypto are taxed at 30%, and the usual distinction between short-term and long-term capital gains does not apply.

The article cites Sanjiv Malhotra, Senior Advisor and Head of Tax at Shardul Amarchand Mangaldas & Co, as saying taxpayers cannot use concessional long-term capital gains rates or indexation for crypto assets. The same regime also blocks investors from adjusting digital asset losses against profits on other trades, meaning gains remain taxable even if other positions ended in loss.

How crypto activity must be reported

The Income Tax Department has added a dedicated Schedule VDA section to the ITR forms for reporting digital asset transactions. Investors are expected to disclose details such as purchase date, sale date, purchase price, sale price and the nature of the income tied to each transaction.

The article says all VDA transactions should be included in the return. It also notes that if 1% TDS has been deducted on eligible crypto transactions, taxpayers should verify that record through Form 26AS or the Annual Information Statement and then claim the credit under Schedule TDS while filing.

What counts as taxable and what does not

The tax treatment does not turn only on buying and selling major tokens such as Bitcoin. According to the article, airdropped tokens are treated as taxable digital assets, and if they are later sold at a profit, the 30% rule applies. NFTs are also classified as VDAs, so gains from NFT sales are subject to the same framework.

Gifted cryptocurrencies also fall within the crypto tax rules, although the article notes that treatment depends on who made the gift and how the assets are transferred. One clear exception mentioned is wallet-to-wallet movement between addresses owned by the same person. Because ownership does not change, those transfers are not treated as taxable transfers.

Deductions remain tightly limited

The source article emphasizes that investors cannot broadly deduct trading-related costs when calculating taxable crypto income. It says the purchase price is the only expense that can be deducted under the Indian crypto tax rules.

Other costs including exchange fees, brokerage, wallet charges, gas fees, mining expenses and transaction charges cannot be claimed as deductions, according to the article. That restriction adds to the compliance burden because investors must track cost of acquisition while recognizing that most associated expenses do not reduce taxable gains.

Deadline and next step for filers

For the Assessment Year 2026-27, the last date to file the income tax return is July 31, 2026, the article says. With that deadline approaching, investors who traded crypto, sold NFTs or received tokens through mechanisms such as airdrops are expected to review their records carefully before filing.

The next confirmed step is the return itself: taxpayers must complete the relevant ITR, include all reportable VDA transactions in Schedule VDA, and reconcile any deducted TDS through Form 26AS or AIS. The article frames timely and accurate filing as the key way to avoid compliance issues with the tax department.

Source: Coin Edition