A blockchain developer is about to receive $150,000 in crypto funding across four tranches over the next three months. The plan sounds simple: convert the crypto to INR, hire three developers, and split the remaining funds with a co-founder. There is just one problem: the developer’s company does not yet exist on paper.
What happens next could determine whether the funds are taxed as business income, trigger avoidable compliance headaches, or qualify for startup benefits that save significant money down the line. In India’s evolving crypto tax landscape, the timing of a company’s incorporation can be just as important as the amount being received.
For founders raising grants, ecosystem funding, or crypto-based startup capital, one question matters most: Should the crypto arrive before the company is formed or after?
The answer can have implications worth several lakhs in taxes, reporting obligations, and future fundraising flexibility. And unlike most tax mistakes, this is one of the few that can still be prevented before the first tranche hits the wallet.
Register the Company Before the First Tranche
This is the most important action item in the entire article. Receiving $150,000 in crypto as an individual is taxable as your personal income. Receiving it through a properly registered private limited company or LLP changes the tax structure, enables startup scheme benefits, and makes future fundraising and hiring significantly simpler.
What to register: A Private Limited Company or an LLP. Sole proprietorships and one-person companies do not qualify for DPIIT Startup India recognition, which is the scheme that unlocks the most significant tax benefits.
How long it takes: Company registration through the MCA portal typically takes 7-15 working days. After that, DPIIT recognition takes another 7-10 working days.
Why it matters before the first tranche: If the first payment arrives in your personal account, it is personal income. Once the company is registered, subsequent payments received in the company’s account are company income with a separate and more favourable set of tax obligations.
Apply for DPIIT Startup India Recognition
Once the company is registered, apply immediately for DPIIT recognition through the Startup India portal. DPIIT recognition opens up income tax benefits for three years under Section 80-IAC, plus exemption from angel tax on fundraising rounds.
What DPIIT recognition gives you:
Benefit | What it means |
Section 80-IAC tax holiday | 100% income tax exemption on company profits for any three consecutive years out of the first 10 years |
Angel tax exemption | Any equity issued at a premium above fair market value is not taxable as income from AY 2025-26 onwards |
Carry forward of losses | Losses can be carried forward even if shareholding changes, as long as original promoters retain control |
Patent and trademark fee rebate | 80% rebate on patent fees, 50% on trademark fees |
Labour law self-certification | Self-certify compliance with several labour regulations for the first five years
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Eligibility: The company must be incorporated within the last 10 years, have an annual turnover not exceeding ₹100 crore in any year, and be working on an innovative product or process. A blockchain development project funded by a global grant almost certainly qualifies.
Register at Startup India.
How the $150,000 Grant Is Taxed
Once the company structure is in place, here is exactly how each tranche of the grant flows through Indian tax law.
Is this professional income or VDA income?
The grant is received as payment for building a blockchain project; it is a consideration for services or development work. This makes it professional income or business income, taxable at the company’s applicable rate, not at the 30% VDA flat rate.
The VDA tax at 30% under Section 115BBH applies to gains from selling or swapping crypto assets. The grant is not an investment gain. It is a payment for work, received in crypto form. The crypto form of payment does not convert professional income into VDA income.
What happens at each stage:
Stage | Tax event | Treatment |
Crypto grant received by company | Professional/business income at INR FMV on date of receipt | Taxable at company rate or Section 80-IAC exempt |
Crypto converted to INR on exchange | VDA disposal: gain is difference between INR received and INR value at receipt | Section 115BBH at 30% on any gain |
INR sits in company account | Not a tax event | No implications
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If the conversion occurs immediately upon receipt, the VDA disposal gain is negligible because the INR value at receipt and at conversion is approximately the same.
At ₹83 per dollar (illustrative), $150,000 = approximately ₹1.24 crore.
Under the Section 80-IAC tax holiday, if the company qualifies, this professional income may be entirely exempt from income tax for up to 3 consecutive years. That is a potential saving of ₹25-30 lakh in company income tax on the full grant amount.
FEMA compliance: Foreign grants received by an Indian company must be reported to the Reserve Bank of India. Depending on the nature of the grant, this may fall under FEMA’s foreign remittance provisions. A CA or company secretary experienced in international payments needs to confirm the correct reporting route before the first payment arrives.
Does GST Apply?
GST applies to the supply of services. If the blockchain project involves providing services to a foreign entity (the grant-giving organisation), it may qualify as an export of services under GST law.
Export of services is zero-rated under GST. This means:
- No GST is collected on the invoice
- The company can claim a refund of input tax credits on expenses
- This is not an exemption; it is a zero-rated supply, which is more beneficial than an exemption
GST registration: If the company’s taxable turnover exceeds ₹20 lakh in a year (₹10 lakh for some states), GST registration is mandatory. For a company receiving ₹1.24 crore in a year, registration is required regardless.
Condition for export of services: The payment must be received in foreign exchange through approved banking channels. This is another reason to structure the grant receipts through a proper company bank account with FEMA compliance in place, not through a personal account or direct crypto wallet.
Hiring Three Developers
For a company that is not yet registered, hiring through a formal employment structure is not yet possible. Once the company is registered, here is how developer salaries are handled.
Monthly salary of ₹1 lakh to ₹1.25 lakh per developer:
The company must deduct TDS from salary payments under Section 192 of the Income-tax Act. The TDS rate depends on each developer’s total annual income and the tax regime they are under.
At ₹1 lakh to ₹1.25 lakh per month (₹12 lakh to ₹15 lakh annually), developers will have tax obligations of their own. The company’s responsibility is to:
- Collect each developer’s Form 12BB (declaration of investments and deductions)
- Calculate the TDS to be deducted each month
- Deposit the TDS with the government by the 7th of the following month
- File quarterly TDS returns (Form 24Q)
- Issue Form 16 to each developer at the year-end
EPF and ESI: Once the company has more than 20 employees, PF registration becomes mandatory. For a three-person team, it is optional but recommended as a hiring benefit.
Government hiring incentives: DPIIT-recognised startups get regulatory relief, including the ability to self-certify compliance with certain labour regulations for the first 5 years. Additionally, the EPFO Pradhan Mantri Rozgar Protsahan Yojana (PMRPY) scheme provides employer PF contribution support for new hires in some categories; check eligibility at the EPFO portal.
Cost to the company per developer per month (illustrative at ₹1 lakh salary):
Component | Amount |
Gross salary | ₹1,00,000 |
Employer PF contribution (if opted) | ₹12,000 |
TDS deducted from salary (varies by slab) | Depends on developer’s total income and regime |
Total employer cost | ₹1,12,000 per month
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For three developers at ₹1 lakh each across 12 months, the total salary cost is approximately ₹36 lakh per year before employer PF contributions.
How the remaining grant is distributed between the two, whether as salary, director’s remuneration, or profit share, depends on whether the entity isregistered as a private limited company or an LLP, and which is more tax-efficient for your specific income levels. This is the one decision in this article that deserves an hour with a CA before the company is registered, not after. The structure choice affects how both founders are taxed for years.
How KoinX Fits Into This
The grant arrives in crypto. Before it reaches the company’s bank account, it passes through a centralised exchange for conversion. Each tranche, received on a different date at a different INR rate, then converted at a slightly different rate, creates a separate pair of tax records: the professional income receipt and the VDA disposal. Four tranches over three months means at least eight separate transactions that need to be correctly dated, valued, and classified before anything reaches the CA’s desk.
This is exactly the kind of complexity where crypto tax software stops being optional and becomes essential. Trying to reconstruct four tranches of grant income, with the correct INR fair market value on each receipt date and the disposal gain on each conversion, from exchange statements that were not designed to produce India-compliant tax reports, is the kind of exercise that takes a CA two to three days and costs ₹15,000 to ₹25,000 in reconstruction fees. Getting the numbers into the right format from the start costs nothing extra.
Sign up on KoinX to track every crypto grant, conversion, and gain.
KoinX is used by over 1.5 million crypto investors across 100+ countries with 800+ exchange and wallet integrations, including Binance, CoinDCX, and other major Indian exchanges.
KoinX turns multi-tranche crypto grants into CA-ready tax records.
For a company receiving multiple grant tranches over three months, it captures each crypto receipt at the historical INR rate on the date of receipt, records the conversion as a separate VDA disposal event, calculates any gain between receipt and conversion, and produces a transaction-level record that separates professional income events from disposal events, the two-column output the company’s CA needs to file correctly.
KoinX calculates your crypto taxes and generates an ITR-compliant report in minutes. The report goes directly into the CA’s hands with every number already separated and verified.
For the complete framework of how crypto grants, professional income in crypto, and VDA disposals are taxed in India, the crypto tax India guide covers every provision. For understanding the TDS obligations on salary payments to developers, the TDS return filing and payment due dates guide covers the full compliance calendar.
