Taxpayers who invested in cryptocurrencies during FY 2025-26 and earned capital gains must declare their crypto income in the Virtual Digital Asset (VDA) schedule of their income tax return. According to reports from Mint, cryptocurrencies are referred to as VDAs in income tax parlance, and income from cryptocurrency sales must be declared in this specific schedule. CA Chirag Chauhan, founder of CA Chauhan & Company, explains that crypto income is taxable at a flat 30% rate, with losses not allowed to be set off against gains, and 1% TDS is deducted at the time of transaction.
The choice between ITR-2 and ITR-3 depends on the overall nature of income rather than crypto transactions alone. As reported by Mint, CA Pratibha Goyal, co-founder of PD Gupta & Company, explains that if crypto is held as an investment and the taxpayer has only salary, house property, or other non-business income, ITR-2 may be applicable. However, if the taxpayer has business or professional income such as intraday trading, F&O trading, or professional receipts, ITR-3 must be filed even if crypto transactions are merely investments. When crypto activities themselves constitute a business, the income should be reported in ITR-3.
ITR-2 is intended for individuals and HUFs who do not have business or professional income. According to Mint, ITR-2 cannot be filed by individuals or HUFs who have income in the nature of interest, salary, bonus, commission, or remuneration due to or received from a partnership firm. CA Chirag Chauhan confirms that if a taxpayer has salaried income plus crypto income, they must use ITR-2. The VDA schedule is missing in ITR-1, making it necessary to choose between ITR-2 and ITR-3 for crypto investors.
ITR-3 is applicable for individuals and Hindu Undivided Family (HUF) that have income from a proprietary business or profession. As reported by Mint, the form is applicable to taxpayers who are not eligible to file ITR-1, ITR-2, or ITR-4. CA Chirag Chauhan notes that those taxpayers who have business income along with crypto income are supposed to file ITR-3. The TDS amount can be cross-verified through AIS/TIS for transaction-level tracking. For FY 2025-26 (AY 2026-27), ITR-3 filing deadline is August 31, 2026 for non-audit cases and October 31, 2026 for accounts requiring audit.
