Crypto & Virtual Digital Assets

Crypto & Virtual Digital Assets — the law in short

Every authority in this library on crypto & virtual digital assets, with what each one decided.

• Internet and Mobile Association of India v RBI Supreme CourtCuts both ways
  The AO's position is that dealing in crypto was illegal in the years under assessment. Is there Supreme Court authority the other way?
  Yes, on the regulatory question. The Supreme Court set aside the RBI's April 2018 circular that had barred regulated entities from providing services to persons dealing in virtual currencies, holding the measure disproportionate, and recorded that RBI itself had not banned virtual currencies. The judgment also records that courts in different jurisdictions have placed virtual currencies in categories ranging from property to commodity. It decides nothing about the Income-tax Act.
• Rhutikumari v Zanmai Labs High CourtCuts both waysNo later treatment found
  The AO says crypto was not property at all before the 2022 amendments, so my gain cannot be a capital gain. Is there a High Court holding that crypto is property?
  Yes, but from outside the tax jurisdiction. Hearing an application for interim protection in a WazirX dispute, the Madras High Court held that crypto currency is property — not tangible property and not currency, but property capable of being enjoyed, possessed in a beneficial form and held in trust. It is a civil ruling under the Arbitration and Conciliation Act, not a decision on the Income-tax Act, so it supports the characterisation argument without deciding any head of income.
• Parmesh Chand Yadav v ITO High CourtHelps departmentSuperseded by amendment
  The AO has issued a s.148A notice on crypto exchange data showing Rs 4.65 crore of transactions. I have given my bank statements and my return — is that enough to stop the s.148 notice?
  No, not on these facts. The Court held that bank statements alone do not verify what the crypto transactions were, that the assessee ought to have produced the crypto currency ledger, and that the officer's brief consideration of the reply satisfied s.148A. The writ against the s.148 notice failed, with liberty to produce the ledger in the reassessment itself.
• Muhammed Arif Shaikh v Asst. Unit, Income Tax Department ITATHelps taxpayerNo later treatment found
  For one year the department accepted 8 per cent presumptive profit on my client's crypto sales; for the next year, on the same information, it has added the whole purchase figure under section 69C. Can it do that?
  Not on this decision. The Ahmedabad Bench held that where the same assessment unit had, for AY 2017-18, accepted a presumptive deemed profit at 8 per cent of the crypto sales, it could not for AY 2018-19 — reopened on the same common information and where the assessee had again offered 8 per cent of his crypto turnover, which the Assessing Officer accepted — go on to add the crypto purchases of Rs 17,52,838 as unexplained expenditure under s.69C. Taking inconsistent stands in the assessee's own case in two different assessment years was held not proper and against the provisions of law, and the addition was deleted.
• Manvendu Bharadwaj v DCIT (International Taxation) ITATHelps departmentNo later treatment found
  My client is abroad and has a reassessment for FY 2017-18 saying he sold bitcoin on an Indian exchange. If he does not engage, what happens?
  This is what happens. The Delhi Bench, hearing and pronouncing on the same day with nobody appearing for the assessee, dismissed the appeal and left standing an addition of Rs 49,12,362 as unexplained short-term capital gain on bitcoin for AY 2018-19. It said only that the income had been correctly assessed under s.147 read with s.144C(13) and that, in the absence of any assistance from the assessee, the Assessing Officer's order was just and proper. Read this entry for the fact pattern and the warning, not for any proposition of law: the Tribunal decided nothing about the head of income.
• Brijesh Poddar v ITO ITATHelps taxpayerJudgment not reachable
  I borrowed money to buy crypto. Can I deduct the interest against my 115BBH income?
  That is what a single note reports, and nothing about the order can be checked. The judgment could not be found in a full-text subscription research database on a search of the party name, the appeal number or the section, and there is no decision of any Tribunal or High Court on s.115BBH in that database at all. What the note reports is that interest on funds borrowed exclusively to acquire virtual digital assets, up to the date of acquisition, was treated as part of the cost of acquisition, s.115BBH(2)(a) barring every other deduction but not defining that expression. Treat it as a line of argument, not as authority.
• Ankit Kabra v ITO ITATHelps departmentNo later treatment found
  My client's total income is under Rs 7 lakh but it includes a small crypto gain, and the CPC has knocked out his Rs 25,000 rebate under section 87A. Is that right?
  On this decision, yes. The Surat Bench held that where the tax on VDA income is computed under s.115BBH, the case is not covered by s.115BAC and the rebate under the proviso to s.87A — which is expressed to apply where the total income is chargeable to tax under s.115BAC(1A) — is therefore not available against it. The appeal was dismissed and the disallowance of the Rs 25,000 rebate for AY 2024-25 was upheld.
• Nashit Suhail Ansari v ITO ITATHelps taxpayerNo later treatment found
  My client has a section 148 notice for AY 2018-19 saying he sold bitcoin and did not file a return. He was a student and made a profit of Rs 48,000. Is there anything in the notice itself?
  There may well be. The Mumbai Bench held that where AY 2018-19 was reopened by a notice dated 19 April 2022, that is beyond three years from the end of the assessment year, so the sanction under s.151 had to come from the Principal Chief Commissioner or Chief Commissioner; approval taken from the Principal Commissioner was invalid, the notice under s.148 was invalid, and everything that followed including the assessment order was void ab initio. On the merits it also held that the addition of Rs 11,28,013 could not stand where the assessee had produced bank statements showing a purchase at Rs 4,10,000 and a sale at Rs 4,58,594 and the Assessing Officer had made the addition on information alone without bringing any adverse material on record or making any enquiry.
• Raunaq Prakash Jain v ITO ITATHelps taxpayerNo later treatment found
  I sold Bitcoin in FY 2020-21, before the VDA regime — capital gains or income from other sources?
  Capital gains, for that year. For AY 2021-22 Bitcoin was a capital asset under s.2(14), so the gain fell under the capital gains head and not s.56, and a holding period of more than three years made it long-term and eligible for s.54F relief on reinvestment in property. This decides only years before the virtual digital asset regime took effect on 1 April 2022; for years inside that regime s.115BBH governs and this answer does not carry across.
• CBDT Guidance Note on crypto-asset reporting CBDT Circulars & InstructionsHelps departmentJudgment not reachable
  Do I have to list every crypto trade separately in Schedule VDA, or can I report the net gain?
  Every trade separately. Schedule VDA requires transaction-wise disclosure — type of VDA, date of acquisition, date of transfer, sale consideration, cost of acquisition, income from the transfer and the s.194S TDS — and consolidating gains across transactions is treated as a compliance error. Alongside that, crypto-asset service providers have their own duty to report crypto transactions in the prescribed form and to run due diligence to identify reportable persons.
• Statutory position — section 285BAA: the crypto-asset reporting entity's statement, and why section 115BBI is a different thing entirely CBDT Circulars & InstructionsCuts both ways
  Our exchange has been told it is a 'reporting entity' for crypto-assets. What does section 285BAA actually require, and is section 115BBI part of the same regime?
  Section 285BAA, inserted by the Finance Act 2025 with effect from 1 April 2026, requires a prescribed reporting entity in respect of a crypto-asset to furnish information about transactions in such crypto-assets in a statement, for such period and within such time, form and manner and to such income-tax authority as prescribed. If the authority thinks the statement defective it must intimate the defect and allow thirty days or longer to rectify, failing which the Act applies as if inaccurate information had been furnished; if no statement is filed the authority may serve a notice requiring one within not more than thirty days; and a reporting entity that later discovers an inaccuracy must inform the authority and furnish the correct information within ten days. The Central Government may prescribe registration of reporting entities, the nature and manner of maintaining information, and the due diligence for identifying crypto-asset users and owners. Section 115BBI is NOT part of this regime: it is a thirty per cent charge on the 'specified income' of certain funds, trusts, universities and hospitals under s.10(23C) and s.11, and has nothing to do with virtual digital assets.
• CBDT Notification 19/2026 on crypto reporting CBDT Circulars & InstructionsHelps department
  Do I have to report my crypto holdings now, or does the exchange do it for me?
  The platform does. Reporting Crypto-Asset Service Providers — Indian exchanges, custodians, wallet providers, broker-dealer platforms and offshore providers servicing Indian users — must report crypto-asset transactions in Form 167 under rules 241 to 244. The compliance burden is placed on the platforms, not on individual investors.
• Statutory position — section 115BBH: thirty per cent, cost of acquisition only, and TWO separate loss bars CBDT Circulars & InstructionsCuts both ways
  My client traded crypto in FY 2023-24 and made a gain on some coins and a loss on others. Can he net the loss off against the gain, and can he carry the balance forward?
  Section 115BBH taxes income from the transfer of a virtual digital asset at a flat thirty per cent from AY 2023-24, and it contains four things, not two. Sub-section (1)(a) fixes the rate; sub-section (2)(a) allows no deduction for any expenditure other than cost of acquisition, and no allowance, and no set off of any loss, in computing that income; sub-section (2)(b) is a SEPARATE bar which stops a loss from the transfer of a virtual digital asset being set off against income computed under any other provision of the Act, and stops that loss being carried forward to succeeding assessment years at all. Sub-section (3) applies the s.2(47) meaning of 'transfer' to a virtual digital asset whether or not it is a capital asset.
• Statutory position — s.194BA: winnings from online games, net winnings, and where s.194B stops CBDT Circulars & InstructionsCuts both ways
  The gaming platform deducted tax on my gross winnings from each game. Should it have been deducting on net winnings under s.194BA instead, and from when?
  Section 194BA was inserted by the Finance Act, 2023 with effect from 1 April 2023 and, notwithstanding anything contained in any other provision of the Act, requires a person paying income by way of winnings from any online game during the financial year to deduct tax on the NET WINNINGS in the payee's user account, computed in the manner prescribed, at the end of the financial year at the rates in force. Where there is a withdrawal from the user account during the year, deduction is at the time of withdrawal on the net winnings comprised in that withdrawal, as well as on the remaining net winnings in the user account computed in the prescribed manner at the end of the year — and from the same date the second proviso to s.194B takes online-game winnings out of s.194B altogether.
• CBDT Circular 23/2022 - the VDA regime's first year CBDT Circulars & InstructionsCuts both ways
  From which assessment year does the flat 30% charge on crypto actually begin, and has the Board itself said anything about set-off?
  Assessment year 2023-24, that is financial year 2022-23. Paragraph 6 of the Board's Explanatory Notes to the Finance Act 2022 records that the s.115BBH amendment "takes effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years". The same paragraph restates the set-off bar in the Board's own words - no set off of any loss arising from transfer of a virtual digital asset against any income computed under any provision of the Act, and no carry forward. The 1% under s.194S is separately recorded as effective from 1st July, 2022.
• Statutory position — section 194S: one per cent on payment for transfer of a VDA, from 1 July 2022 CBDT Circulars & InstructionsCuts both ways
  We are paying for crypto bought from an Indian seller. Do we deduct tax, at what rate, and is there a threshold below which we can ignore it?
  Yes, from 1 July 2022. Section 194S requires any person responsible for paying a resident any sum by way of consideration for transfer of a virtual digital asset to deduct one per cent of that sum, at the time of credit to the resident's account or at the time of payment, whichever is earlier. No tax is deducted where the payer is a 'specified person' and the value or aggregate value of the consideration does not exceed Rs 50,000 during the financial year, or where the payer is anyone else and it does not exceed Rs 10,000 during the financial year. Where the consideration is wholly in kind, or is a swap of one VDA for another, or the cash part is not enough to fund the deduction, the payer must ensure the tax has been paid BEFORE releasing the consideration.
• Notification 73/2022 — Form 26QF for exchanges CBDT Circulars & InstructionsCuts both ways
  The exchange agreed under the CBDT guidelines to pay the 1% on its own sale to me. How does that get reported, and where do I see it?
  Through Form 26QF, filed quarterly by the exchange. Where an exchange has agreed, under the guidelines issued under s.194S(6), to pay the tax on a transfer of a virtual digital asset owned by it instead of the buyer deducting, rule 31A(1) requires the exchange to deliver a quarterly statement of those transactions in Form 26QF. Sub-rule (4E) also requires the exchange to furnish particulars of amounts paid or credited on which no tax was deducted in accordance with the guidelines.
• CBDT Notifications 74 & 75/2022 CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  Are gift cards, loyalty points and NFTs backed by a physical asset caught by the crypto tax rules?
  No. Notification 74/2022 excludes gift cards, vouchers, reward points and loyalty cards from the s.2(47A) definition, and Notification 75/2022 excludes physical NFTs — tokens whose transfer results in transfer of ownership of an underlying tangible asset. What remains inside the regime is crypto-assets and notified NFTs.
• CBDT Circular 14/2022 CBDT Circulars & InstructionsCuts both waysNo later treatment found
  I bought crypto directly from the seller, no exchange — do I deduct? And what if I paid in crypto rather than cash?
  You deduct. In a peer-to-peer transfer the buyer is the person paying the consideration and must deduct under s.194S. Where the consideration is in kind, or is itself another virtual digital asset, the payer must ensure the tax has actually been paid before releasing the consideration — and on a swap each party is both buyer and seller, so each deducts on the transfer it makes.
• CBDT Circular 13/2022 CBDT Circulars & InstructionsCuts both ways
  I trade crypto on an exchange. Who deducts the 1% under s.194S, on what amount, and what changes if a broker is in the chain?
  The exchange. Where a transfer takes place on or through an exchange that is not itself the owner, only the exchange crediting or paying the seller deducts. Where a broker is in the chain, the obligation moves to the broker only if there is a written agreement between the exchange and the broker allocating it. Where the exchange itself owns the asset, the buyer may by written agreement leave the deduction and payment to the exchange.
• Notification 67/2022 — the 194S forms CBDT Circulars & InstructionsCuts both waysNo later treatment found
  I deducted 1% under s.194S on a peer-to-peer purchase. Which challan and which certificate, and by when?
  Form 26QE and Form 16E, on a thirty-day clock. A specified person deducting under s.194S pays the tax within thirty days from the end of the month of deduction, accompanied by a challan-cum-statement in Form 26QE filed electronically within the same thirty days, and issues the certificate in Form 16E to the payee within fifteen days of that due date. Form 26Q was substituted at the same time to carry ss.194R and 194S for deductors who are not specified persons.
• Statutory position — section 139(8A) and section 140B: the updated return, its five provisos, and the additional tax CBDT Circulars & InstructionsCuts both ways
  My client never declared his crypto gains. Can he still put them right by an updated return, how long has he got, and what will it cost him?
  An updated return under s.139(8A) may now be furnished at any time within FORTY-EIGHT months from the end of the relevant assessment year — the Finance Act 2025 substituted 'forty-eight' for 'twenty-four' with effect from 1 April 2025 — but only if none of five provisos bars it. It cannot be used at all if the updated return would be a return of a loss, or would decrease the total tax liability determined on the earlier return, or would produce or increase a refund; it cannot be used where a search under s.132, a requisition under s.132A or a survey under s.133A other than s.133A(2A) has taken place, or where seized assets or books of another person have been notified as belonging or pertaining to the assessee; and it cannot be used where an updated return has already been furnished for that year, or where ANY proceeding for assessment, reassessment, recomputation or revision is pending or has been completed for that year, or where SAFEMA, Benami, PMLA or Black Money Act information or information under a s.90 or s.90A agreement has been communicated to the assessee, or where prosecution under Chapter XXII has been initiated, or where the person is notified by the Board. A fourth proviso, inserted by the same Finance Act 2025, bars an updated return altogether where a show-cause notice under s.148A has been issued after thirty-six months from the end of the relevant assessment year, and a fifth proviso disapplies that bar where an order under s.148A(3) has determined that it is not a fit case to issue a notice under s.148. The price is set by s.140B: additional income-tax of twenty-five per cent of the aggregate of tax and interest if filed within twelve months of the end of the assessment year, fifty per cent within twenty-four months, sixty per cent within thirty-six months and seventy per cent within forty-eight months, over and above the tax, interest and fee otherwise payable.
• Statutory position — section 2(47A): what is a virtual digital asset, and what the Government can take out of it CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  The notice says my client dealt in a 'virtual digital asset'. What actually falls inside that definition, and are vouchers, reward points and NFTs inside it?
  Section 2(47A), inserted by the Finance Act 2022 with effect from 1 April 2022, defined a virtual digital asset in three limbs for AY 2023-24 to AY 2025-26 — a fourth sub-clause (d) has since been added, which this entry does NOT set out because it could not be read (see the editor note) — (a) any information, code, number or token, not being Indian or foreign currency, generated through cryptographic means or otherwise, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functioning as a store of value or a unit of account, and capable of being transferred, stored or traded electronically; (b) a non-fungible token or any other token of similar nature; and (c) any other digital asset the Central Government notifies. A proviso lets the Central Government notify EXCLUSIONS from the definition, subject to conditions, and the Explanation makes 'non-fungible token' itself mean only such digital asset as the Government notifies, and imports the FEMA meanings of 'currency', 'foreign currency' and 'Indian currency'.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.