Reporting Crypto Profits: A Guide for Tier-2 Traders

As crypto trading grows in India, more investors from Tier-2 cities are joining the wave. But with profits come responsibilities, especially when it comes to paying taxes. Many first-time traders are still unclear about how to report their earnings. Recent moves by the Income Tax department show that hiding crypto profits is no longer an option. Here’s a simple guide to help small-town traders understand the basics of reporting correctly.

Crypto is treated as a Virtual Digital Asset in India. This means any profit made from buying and selling coins is taxable, just like gains from shares or property. The flat tax rate is 30 percent on profits, plus surcharge and cess. Unlike stocks, you cannot offset losses from crypto against other income, which makes accurate reporting even more important.

Every transaction is also subject to a 1 percent TDS on trades above a certain limit. For small-town investors, this often shows up as a small cut on each transaction. While it may look minor, the TDS records go directly to the government, creating a digital trail of your activity. So, even if profits are small, they should still be declared to avoid future complications.

Filing income tax returns with crypto profits is straightforward if done carefully. Traders need to declare income under the category of Virtual Digital Assets. Most tax-filing platforms now have dedicated sections for this, making it easier to report. For those unfamiliar, consulting a local tax advisor can help ensure nothing is missed.

For Tier-2 traders, the key is awareness. Crypto is exciting and offers new opportunities, but the tax rules are strict. By maintaining clear records of trades, saving exchange statements, and filing returns honestly, investors can avoid penalties and continue to grow in this new market with confidence. Reporting profits is not just a legal requirement—it’s a step toward building long-term trust and credibility in India’s financial system.