A Complete Guide to Reporting for Overseas Cryptos in India for FY 2023-24

The global allure of cryptocurrencies has led many Indians to invest in digital assets through international platforms like Binance, KuCoin, and Coinbase. While these platforms offer a vast array of assets, they also bring a complex set of compliance challenges. For many Indian investors, the biggest uncertainty lies in the rules for reporting for overseas cryptos. This confusion is understandable, but ignoring it can lead to severe consequences. Proper overseas cryptocurrency reporting in India is not just a suggestion; it is a legal mandate. This guide aims to demystify the entire process, providing a clear, step-by-step framework to ensure your tax filing for overseas cryptos India is fully compliant with the latest regulations.

Why is Reporting for Overseas Cryptos a Critical Compliance Matter?

First, let’s clarify what constitutes an “overseas” crypto asset. In simple terms, if you hold cryptocurrencies in an account or wallet managed by a foreign-based entity (like an international exchange), it is considered a foreign asset for reporting purposes. The physical location of the asset is less important than the location and jurisdiction of the entity holding it on your behalf.

Understanding the Indian regulations on overseas crypto reporting is crucial because the government treats non-compliance very seriously. Here’s why this is a critical matter:

The Black Money Act, 2015: The primary legislation targeting undisclosed foreign assets is The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Failing to report your overseas crypto holdings can bring you under the scanner of this stringent law, leading to massive penalties.
Compliance with Income Tax Act, 1961: The Income Tax Act mandates that all residents disclose their worldwide income and assets. The overseas asset reporting requirements India are an integral part of this, and your crypto holdings are no exception.
Maintaining a Clean Financial Record: Proper disclosure ensures your financial history remains transparent and clean. This is vital when applying for loans, visas for foreign travel, or undertaking any major financial transaction where your financial records are scrutinized. Non-compliance can create significant hurdles in the future.

Key Indian Regulations on Overseas Crypto Reporting You Must Know

To fully grasp the importance of disclosure, it’s essential to understand the legal framework that governs it. Three key acts define your responsibilities as an investor in foreign digital assets.

The Income Tax Act, 1961

This is the foundational law for all tax-related matters in India, and it has specific provisions for Virtual Digital Assets (VDAs), which include cryptocurrencies.

Disclosure in Schedule FA (Foreign Assets): The Income Tax Act requires all individuals who are ‘Resident and Ordinarily Resident’ (ROR) to disclose details of any foreign assets held by them in their Income Tax Return (ITR). This is done in a specific section called Schedule FA. Your overseas crypto holdings fall squarely into this category.
Tax on Gains under Section 115BBH: This section, introduced in the Finance Act 2022, lays down the tax treatment for VDAs. It mandates a flat 30% tax on any income generated from the transfer (sale, swap, etc.) of such assets.
Actionable Tip: Ensure your PAN is linked and KYC is completed with all your crypto exchange accounts, whether Indian or foreign. This helps create a clear trail for tax authorities.

The Black Money Act, 2015

This act was specifically designed to tackle the issue of undisclosed foreign income and assets held by Indian residents.

Purpose: Its primary goal is to bring foreign assets held by Indians into the legal and tax framework. Cryptocurrencies held on foreign exchanges are considered foreign assets under this law.
Consequences of Non-Disclosure: The penalties for non-compliance are severe. If you fail to disclose a foreign asset (like crypto), you could face:

A flat penalty of ₹10 lakh.
Tax at 30% on the value of the undisclosed asset.
An additional penalty of up to 90% of the tax due, bringing the total liability to 120% of the tax.
Potential for criminal prosecution, leading to imprisonment.

These steep penalties underscore the government’s zero-tolerance policy towards undisclosed foreign assets, making the overseas asset reporting requirements India non-negotiable.

Foreign Exchange Management Act (FEMA), 1999

FEMA governs all transactions involving foreign exchange and overseas investments by Indian residents.

Role of FEMA: This act regulates the flow of money in and out of India. While the RBI has issued cautionary notices about cryptocurrencies, its classification under FEMA remains somewhat ambiguous. Understanding how FEMA impacts crypto & virtual digital assets in India is crucial for investors.
Income Tax Perspective is Clear: Regardless of FEMA’s stance, the Income Tax Department’s position is crystal clear: if you own a foreign asset and generate income from it, it must be reported and taxed in India. Your tax obligations exist independently of any FEMA regulations. For more detailed information on foreign exchange rules, you can refer to the RBI’s FEMA FAQ page.

Step-by-Step Guide: How to Report Overseas Cryptocurrencies in Your ITR

Now, let’s move to the practical part. Here is a detailed, step-by-step guide on how to report overseas cryptocurrencies India in your Income Tax Return for the Financial Year 2023-24 (Assessment Year 2024-25). For a general overview, our Beginners’ Guide to Filing Income Tax Returns Online can be very helpful.

Step 1: Determine the Correct ITR Form

The first step is choosing the right ITR form. If you have foreign assets, your options are limited.

ITR-1 (Sahaj): You cannot use this form. ITR-1 is for simple salary income and does not have a provision for disclosing foreign assets.
ITR-2: This form is suitable for salaried individuals who have income from other sources like capital gains, rental income, or, importantly, foreign assets. If you are a salaried employee holding crypto on an overseas exchange, this is likely the form for you.
ITR-3: This form is for individuals and HUFs who have income from a business or profession. If you are a freelancer, consultant, or business owner who also invests in overseas crypto, you must use ITR-3.

Step 2: Filling Schedule FA (Foreign Assets)

This is the most crucial part of the disclosure process. Schedule FA is where you declare your ownership of the overseas crypto assets. You must provide the following details accurately:

Information Required	Details to Provide
Country Name & Code	The country where the foreign crypto exchange is legally based (e.g., Cayman Islands for Binance, Seychelles for KuCoin).
Nature of Asset	Mention “Cryptocurrency” or “Virtual Digital Asset.”
Details of Entity	The full legal name of the foreign crypto exchange (e.g., Binance Holdings Limited).
Peak Value of Investment	The highest value of your crypto portfolio on the exchange at any point during the financial year (April 1 to March 31). This must be converted to Indian Rupees (INR) using the exchange rate on that day.
Closing Value	The fair market value of your crypto portfolio on the exchange as of March 31st of the financial year, converted to INR.
Total Gross Amount Paid	The total cost of acquisition for all the assets held, including any amounts transferred from India.

Accurately filling this schedule is the primary requirement for compliance.

Step 3: Reporting Foreign Cryptocurrency Income in Schedule VDA

While Schedule FA is for disclosing your holdings, Schedule VDA is for reporting the income you earned from them. If you sold, swapped, or transferred any crypto during the financial year, you must report the resulting profit or loss here.

What is Schedule VDA? This dedicated schedule captures all transactions related to Virtual Digital Assets.
Details Required:

Date of Acquisition: When you bought the crypto.
Date of Transfer: When you sold or exchanged the crypto.
Cost of Acquisition: The price at which you purchased the crypto. Important: No other expense can be claimed.
Consideration Received: The sale value of the crypto.
Resulting Income: The profit (Consideration Received – Cost of Acquisition).

This schedule directly addresses the reporting foreign cryptocurrency income India requirement and ensures the income is taxed correctly. You can access the ITR forms and schedules on the official Income Tax India Website.

Understanding the Overseas Crypto Tax Implications in India

Reporting is one half of the coin; understanding the tax you need to pay is the other. The overseas crypto tax implications India are unique and stringent compared to other asset classes.

Flat 30% Tax on Gains

Any profit you make from the transfer of a VDA is taxed at a flat rate of 30%, plus applicable surcharge and cess. This tax rate applies regardless of your total income or the tax slab you fall into. Whether you earn ₹5 lakh or ₹5 crore a year, your crypto profit is taxed at this high rate.

No Deduction of Expenses

The law is very strict here. When calculating your crypto profit, the only deduction allowed is the cost of acquisition. You cannot claim any other expenses, such as:

Exchange trading fees
Transaction or network fees
Internet or electricity bills
Cost of a trading device or software

No Set-Off for Losses

This is one of the harshest provisions.

No Set-Off: If you incur a loss from a crypto transaction, you cannot set it off against any other income. This means you cannot reduce your tax liability from your salary, business income, or capital gains from stocks by showing a crypto loss.
No Carry Forward: Furthermore, you cannot carry forward your crypto losses to future financial years to offset future crypto gains. Each year is treated independently.

TDS under Section 194S

Section 194S mandates a 1% Tax Deducted at Source (TDS) on the transfer of VDAs. When you trade on an Indian exchange, the exchange handles this. However, for transactions on a foreign exchange, the platform will not deduct this TDS. In such cases, the compliance responsibility may shift to you, the resident individual. You should account for this tax liability and pay it as part of your Understanding and Managing Advance Tax Payments to avoid interest penalties.

Conclusion

Navigating the world of global crypto investments is exciting, but it comes with significant responsibilities. The Indian government has laid down a clear, albeit strict, framework for disclosure and taxation. Ignoring these rules is not an option and can lead to financial and legal turmoil.

Let’s summarize the key takeaways:

Reporting is Mandatory: Disclosing your overseas crypto holdings in Schedule FA of your ITR is a legal requirement.
Use the Right ITR Form: You must use ITR-2 or ITR-3, as ITR-1 does not support foreign asset disclosure.
Severe Penalties for Non-Disclosure: Failure to report can trigger harsh penalties under the Black Money Act, including a fine of ₹10 lakh and more.
Steep Tax with No Benefits: Profits are taxed at a flat 30%, and you cannot set off or carry forward any losses.

Navigating the complexities of reporting for overseas cryptos can be challenging. Don’t risk non-compliance and face the consequences. Contact the experts at TaxRobo Online CA Consultation Service today for a hassle-free tax filing experience and ensure your investments are fully compliant.

Frequently Asked Questions (FAQs)

1. What are the penalties if I fail to report my overseas crypto assets in Schedule FA?

Failure to report foreign assets in Schedule FA is a serious offense. Under the Black Money Act, 2015, it can attract a flat penalty of ₹10 lakh. This is in addition to any tax and penalty levied on the undisclosed income itself, which can go up to 120% of the tax amount.

2. Do I need to report crypto held in a personal hardware wallet (like Ledger or Trezor)?

This is a grey area in the law. However, the most conservative and recommended approach is to declare it in Schedule FA. If the crypto was purchased through a foreign exchange and then moved to a personal wallet, its source remains foreign. The key is to maintain transparency. Declaring it minimizes the risk of future scrutiny and allegations of concealment.

3. I only bought crypto on a foreign exchange but haven’t sold it. Do I still need to report it?

Yes, absolutely. The requirement to report in Schedule FA is for holding a foreign asset. It is independent of whether you have earned any income from it. Even if you have made no sales and have no income to report in Schedule VDA, you must still disclose the asset and its value in Schedule FA.

4. Can I offset my crypto losses from a foreign exchange against my Indian stock market profits?

No. Section 115BBH of the Income Tax Act explicitly prohibits the set-off of losses from the transfer of VDAs (like crypto) against any other head of income. This includes Understanding Capital Gains Tax in India, mutual funds, property, or income from salary or business. Crypto losses can also not be carried forward to subsequent years.

Reporting for Overseas Cryptos: What You MUST Know