How to Report Crypto, NFTs, Tokens Income: Schedule VDA in ITR Explained

Schedule VDA is the reporting schedule in the Income Tax Return for income arising from the transfer of Virtual Digital Assets. It is relevant for taxpayers who have sold, exchanged or transferred crypto assets, NFTs or other notified digital assets during the financial year.

For Indian taxpayers, this schedule has become an important part of ITR filing because VDA income is taxed under a separate tax regime. The Income Tax Act does not treat it like normal equity capital gains or regular business profit. It has its own tax rate, reporting format, and loss adjustment restrictions.

What is a Virtual Digital Asset?

A Virtual Digital Asset, or VDA, includes crypto assets, non-fungible tokens, and other digital assets notified by the Central Government. Bitcoin, Ethereum, stable tokens, utility tokens, and NFTs fall within this broad category when they satisfy the statutory definition.

Indian currency and foreign currency are not VDAs. The Digital Rupee issued by the Reserve Bank of India is also not treated like a private crypto asset because it is an official currency. Certain notified items such as gift cards, vouchers, reward points, loyalty points, and website subscriptions are also excluded when they meet the prescribed conditions.

Schedule VDA is relevant for taxpayers dealing with crypto and NFT transactions, not for ordinary online wallet balances or banking transactions.

Why Schedule VDA is Required in ITR

Schedule VDA captures transaction-wise details of every transfer of a Virtual Digital Asset. A taxpayer cannot report only the net profit figure from all crypto trades.

For every transfer, the taxpayer has to disclose details such as:

• Particular
• Meaning
• Date of acquisition
• Date on which the VDA was purchased or received
• Date of transfer
• Date on which the VDA was sold, exchanged or transferred
• Cost of acquisition
• Purchase cost or eligible cost as per law
• Consideration received
• Sale value or value received on transfer
• Income
• Consideration minus cost of acquisition
• Head of income
• Capital gains or business income, based on facts

This transaction-wise reporting helps the Income Tax Department match the ITR with AIS, Form 26AS, exchange records, TDS under Section 194S, and bank entries.

Tax Provision Under Section 115BBH

Section 115BBH of the Income Tax Act deals with tax on income from Virtual Digital Assets. The law taxes income from transfer of VDA at a flat rate of 30%, plus surcharge and cess. The key statutory phrase is “at the rate of thirty per cent”. This means the taxpayer pays tax on VDA income at 30%, regardless of the slab rate.

Section 115BBH also restricts deductions. The law permits deduction only for cost of acquisition. It specifically denies other expenses, allowances, and loss set-off. The taxpayer does not get deduction for trading fees, exchange charges, internet cost, advisory charges, mining-related expenses, or other incidental expenses while computing income under this section.

How Income is Computed in Schedule VDA

The computation in Schedule VDA is simple:

Consideration received minus cost of acquisition equals income from transfer of VDA.

For example, Rohan bought crypto for Rs. 1,00,000 and sold it for Rs. 1,60,000. His income from transfer is Rs. 60,000. Tax under Section 115BBH is calculated at 30% on Rs. 60,000, plus surcharge and cess.

Now take another example. Priya bought an NFT for Rs. 80,000 and sold it for Rs. 50,000. She has a loss of Rs. 30,000. This loss is not available for set-off against salary, business income, capital gains, or income from another VDA transaction. It is also not carried forward to the next year.

This is one of the strictest parts of the VDA tax regime. Profit is taxed, but loss does not reduce other taxable income.

Head of Income: Capital Gains or Business Income

Schedule VDA requires the taxpayer to select the head under which income is reported. In practice, the classification depends on facts.

Where a person invests in crypto as an asset and sells it later, the income is reported under capital gains. Where a person carries out frequent crypto trading as an organized activity with business intent, the income is reported under profits and gains of business or profession.

The tax rate remains 30% under Section 115BBH in both cases. However, the classification matters for ITR form selection, books of account, advance tax and reporting discipline.

TDS Under Section 194S

Section 194S provides for TDS on payment for transfer of VDA. The payer has to deduct 1% tax on the consideration paid to a resident for transfer of a VDA.

The provision applies at the time of credit or payment, whichever is earlier. Where consideration is paid in kind or partly in cash and partly in kind, the payer must ensure that the required tax is paid before releasing the consideration.

The threshold is Rs. 50,000 in a financial year where payment is made by a specified person. For others, the threshold is Rs. 10,000.

Taxpayers should check Form 26AS and AIS before filing ITR because TDS under Section 194S gets reflected there. A mismatch between exchange records and ITR reporting creates scrutiny risk.

Which ITR Forms Have Schedule VDA?

Schedule VDA is available in ITR-2, ITR-3, ITR-5, ITR-6, and ITR-7. For individuals, ITR-2 is used where VDA income is reported as capital gains and there is no business income. ITR-3 is used where the taxpayer has business or professional income, including VDA trading treated as business activity.

Records Taxpayers Should Maintain

Taxpayers should preserve exchange statements, wallet transaction history, purchase invoices, sale records, bank statements, TDS details and valuation records for crypto-to-crypto or NFT transactions.

Where a VDA is received as a gift, the taxpayer should maintain details of the donor, date of receipt, fair value, and tax treatment under Section 56(2)(x), where applicable.

Schedule VDA is not a simple summary schedule. It requires transaction-wise disclosure of every transfer of Virtual Digital Assets during the financial year. Income is taxed at 30% under Section 115BBH. Only the cost of acquisition is allowed as a deduction. Loss is not allowed for set-off or carry-forward. TDS under Section 194S also creates a reporting trail.

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