He is 17. Since the age of 15, he has been doing freelance design work for foreign clients who paid him in USDT. Some of that income went into crypto trading, and over two years, the portfolio grew to nearly ₹20 lakh in a non-custodial wallet. He has never withdrawn the money and assumed the tax question could wait until adulthood.
The problem is that India’s tax law does not wait for him to turn 18.
Under Section 64 (1A) of the Income Tax Act, a minor’s income, including freelance earnings and potentially crypto trading gains, is generally clubbed with the income of the higher-earning parent and taxed in the year it was earned. That means the tax liability may have started at 15, not at withdrawal, and not at adulthood.
The portfolio sitting in the wallet today is the result of tax years that may already be closed.
Two Income Types, Two Tax Treatments, Both Already Live
His situation is more layered than a straightforward crypto-gains story because the ₹20 lakh portfolio has two distinct sources, and the Income Tax Act treats them differently.
The freelance income: USDT received as payment for design work is not a VDA gain. It is professional income, earned in exchange for services, taxable under normal income tax provisions at the applicable slab rate. Section 115BBH does not apply to it. What applies is the obligation to report it as income in the year it was received, at its INR fair market value on the date of receipt.
For instance, if he received $1,000 worth of USDT in October 2022 and the INR equivalent that day was ₹83,000, then ₹83,000 was professional income in FY 2022-23, clubbed with his parent’s income, taxable at the parent’s’ marginal slab rate.
The trading gains sit in a different territory. Every time he bought one crypto asset and sold or swapped it for another, it was a VDA transfer under Section 115BBH, taxable at 30% plus 4% cess in the financial year in which the trade occurred, regardless of whether INR was ever involved.
Income type | Tax provision | Rate | Clubbed with parent? |
USDT received for freelance services | Normal income tax | Parent’s slab rate | Yes, unless manual-skill exception applies |
Crypto trading gains (buy and sell) | Section 115BBH | 30% | Yes, at flat VDA rate regardless of parent’s slab |
Unrealised holdings (never sold) | No taxable event | Nil | N/A
|
The flat 30% VDA rate applies regardless of whose income the gain is clubbed with. There is no scenario where attributing a minor’s crypto gains to a lower-slab parent reduces the effective rate. The 30% is the floor and the ceiling.
What Closing Financial Years Actually Mean
FY 2022-23 closed for belated filing on December 31, 2023. FY 2023-24 closed for belated filing on December 31, 2024. If income from either year was not reported in the parent’s ITR, the window to file a belated return has passed.
What remains available depends on whether an original return was filed at all.
If an original return was filed for those years: A revised return under Section 139(5) can correct the omission, subject to the revision window still being open.
If no return was filed: The path is an updated return under Section 139(8A), which carries an additional tax of 25% of the base liability if filed within 12 months of the assessment year end, rising to 50% between 12 and 24 months. Beyond 24 months, the ITD can initiate assessment proceedings independently.
None of this is insurmountable. It is, however, substantially more expensive than reporting on time would have been, and the cost compounds with every month the correction is deferred.
The Exception That May Apply, and the Catch That Comes With It
Section 64(1A) has one exception worth examining for a freelancing minor. Income from manual work or activity involving a skill, talent, or specialised knowledge is not clubbed with the parent’s income. The minor’s professional income from their own creative skill is taxable in their hands independently.
Design work is a skill. If his freelance income genuinely came from his own creative work, it may fall outside the clubbing provision entirely, reportable as his own income rather than being added to the parent’s total.
The catch is practical rather than legal. A minor cannot obtain a PAN independently in most circumstances. Filing a minor’s individual return requires the parent or guardian to file on the minor’s behalf. The exemption from clubbing does not make the income disappear. It changes whose return it appears in, and it requires documentation: the actual contracts, payment records, and transaction history that establish the work as genuinely skill-based rather than passive investment income.
Whether his specific work qualifies is not a determination that can be made from a Reddit post. It is the precise question a CA with experience in minor taxation and crypto income needs to answer, and it is a question worth answering before the birthday, not after.
The Birthday Problem the Withdrawal Plan Misses
When he does turn 18 and converts the wallet to INR, that is itself a taxable event. The gain is sale proceeds minus the original acquisition cost of each asset, taxed at 30% under Section 115BBH.
Here is what the withdrawal plan does not account for.
The birthday does not reset the acquisition cost. A Bitcoin acquired at ₹4,00,000 in October 2022 still has an acquisition cost of ₹4,00,000 on the day after his 18th birthday. The gain on that asset is calculated based on its cost when it was acquired as a minor, not on the day he became an adult. And the tax history of that asset, whether the USDT that bought it was reported as freelance income in FY 2022-23, does not reset with age.
From his 18th birthday onward, any income he earns is his own and is filed in his own ITR. What does not become his own is the history of what happened before. The two years of trading activity, the USDT freelance receipts, the crypto purchases and disposals, all of that retains its existing tax history regardless of what a birth certificate now says.
At KoinX, this is the scenario in which we most often see people arrive at the platform after waiting, expecting a clean start, only to find that the transaction history they need to reconstruct predates their adult status by two or three financial years. The reconstruction is solvable. What makes it harder is the assumption that the birthday was a reset; it was not.
What the Portfolio Needs Right Now
Before any filing decision can be made, a CA needs the following from this trader:
- A valuation of every asset at acquisition, dated to the financial year in which each was acquired.
- A categorisation of which portion represents professional income (the freelance USDT receipts) and which represents trading gains (the disposals).
- A determination of whether the manual-skill exception applies to any portion of the freelance income.
- An assessment of what, if anything, was reported in any parent’s ITR across FY 2022-23 and FY 2023-24.
None of this can be derived from an exchange dashboard, because most of the assets came through non-custodial wallets and foreign platforms. It requires reconstructing a transaction history across multiple financial years, denominating every event in INR at the historical exchange rate on the date it occurred, and separating income types so the correct tax treatment is applied to each.
This is the data reconstruction problem that KoinX is built around. With over 800 exchange and wallet integrations and data covering 700 million+ transactions and $10 billion+ in crypto tracked, it imports transaction histories from non-custodial wallets and foreign platforms, converts every event to INR at the historical rate on the date of the transaction, and produces a year-by-year Schedule VDA breakdown covering every financial year in the import.
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What Changes When He Turns 18
From the date of his 18th birthday, any crypto income he earns is his own. He can open exchange accounts directly in his name. He files ITR-2 if he has VDA income alongside other sources, or ITR-3 if he treats crypto trading as a business. He is responsible for advance tax if his estimated annual liability exceeds ₹10,000, payable in quarterly instalments across the financial year. TDS deducted under Section 194S by Indian exchanges is creditable against his tax liability.
The complication is the two years before the birthday, and whether those are being left unresolved while he waits.
The question he should be asking right now, six months before the birthday rather than six months after, is what the tax position was for each of the past financial years, what was reported, and what needs to be corrected. That conversation with a CA is significantly cheaper and simpler now than after a notice arrives.
For the complete framework of how India taxes crypto income, including trading gains, freelance receipts in crypto, and VDA transfers, the crypto tax India guide covers every provision. For traders who have already identified unreported years, the revised return guide under Section 139(5) is the right starting point before consulting a CA.
