What Constitutes a Taxable Crypto Event?
Tax obligations arise in two main categories: Crypto income – earned through mining, staking, airdrops, or as compensation. Recognized as ordinary income (10–37%). Capital gains – from selling, trading, or swapping cryptocurrency. Gains held less than 1 year are short-term (10–37%), while over 1 year are long-term (0–20%).
Crypto Tax Rules in the US (IRS)
The IRS treats crypto as property. All dispositions (sales, trades, use in purchases) must be reported via Form 8949 and Schedule D. Starting 2025, brokers like Coinbase will issue Form 1099-DA reporting gross sale proceeds (and by 2026, cost basis too). Crypto income such as staking rewards or airdrops is reported as ordinary income on Schedule 1, similar to wages.
Crypto Tax Rules in India
India taxes crypto transfers (trading, selling, swapping) at a flat 30% plus 4% cess/surcharge, with no deduction except acquisition cost. A 1% TDS applies on each transaction above ₹10,000 (₹50,000 for businesses)—mandatory since July 2022. Losses cannot be set off against other income or future crypto gains. Starting FY 2025–26, reporting is mandatory in Schedule VDA of ITR-2/3. Non-reporting risks up to 60% penalty, plus search and seizure actions by CBDT.
Step-by-Step: How to Pay Crypto Tax
In the US: 1. Track all transactions with date, value, gains/losses. Use wallets or tax software like CoinLedger or TurboTax. 2. For income events, record FMV at receipt and report as ordinary income. 3. For disposals, use Form 8949 → Schedule D. 4. Include 1099-DA/B/MISC forms from brokers. 5. File by April 15 (extensions available).
In India: 1. Compile all crypto trades/transfers, with dates, acquisition/disposal cost, and sale value. 2. Calculate profits — taxed at 30% on gains from transfers. 3. Exchange handles 1% TDS; claim credit when filing. 4. File ITR-2/3 with Schedule VDA details. 5. Pay tax plus cess; file before due date (e.g., July 31). 6. Respond to any IT department notices—correct via revised return if needed.
Tips to Stay Compliant
Maintain detailed records: dates, amounts, FMV, gains/losses for each crypto event. Use tax software: tools like Koinly, CoinLedger simplify filing. Report all income: airdrops, gifts, staking and mining income count as ordinary income. Keep proof of cost basis: needed to validate gains and avoid IRS or IT disputes. React promptly to notices: Indian authorities are actively auditing undisclosed crypto income.
Why Compliance Matters
Avoid penalties: US IRS can issue fines, interest, and audits for under-reporting. India can impose heavy penalties and seize wallets/storage. Regulatory transparency: global moves like CARF/DAC-8 mandate exchanges share crypto-user data with tax authorities. Peace of mind: compliance prevents future hassles, audits, or legal consequences.
Conclusion: Smart Crypto Tax Strategy
A solid crypto tax strategy involves accurate tracking, clear understanding of income vs capital gains, timely filing with all appropriate forms, and use of reliable tools. Whether you reside in the US or India, proactive reporting and organized records will help you avoid legal risks and stay compliant in the evolving tax landscape.
Crypto tax guide summary:
- Track every crypto event
- Income taxed as ordinary income
- Gains taxed based on holding period
- File required forms (8949/Schedule D/1099 in US; Schedule VDA, ITR-2/3 in India)
- Use tax software, maintain records, stay compliant