Operating a crypto-inclusive company in India in 2026 means managing far more than just finances.
Every crypto transaction, every service fee, and every token held in a foreign wallet now sits inside a compliance framework that three separate government bodies can already see.
The Income Tax Department (ITD) tracks every transaction through Form 26AS. GST authorities monitor service revenue through GSTN returns. The Financial Intelligence Unit (FIU) receives transaction data from the 97 crypto platforms registered under PMLA by December 2024. That data does not sit in silos; it is automatically cross-referenced.
Most companies know about the 30% VDA tax and assume that is the full picture. Sadly, it is not. Income tax, TDS on every purchase, GST on platform services, and FEMA on cross-border transfers all apply simultaneously.
This guide covers every obligation a company or LLP faces in India for FY 2025-26 (AY 2026-27), from how VDAs are presented on the balance sheet to what the Enforcement Directorate can already see to exactly how to file each obligation correctly before the deadline.
Key Takeaways
- VDAs held as treasury assets are classified as intangible assets under AS 26 or Ind AS 38. Trading companies classify them as inventory under AS 2 or Ind AS 2, and the choice directly affects impairment treatment and cost basis.
- Section 115BBH taxes all VDA disposal gains at 30% plus 4% cess. Section 115BAA’s concessional 22% rate applies only to domestic companies, not LLPs and also attracts a 10% surcharge.
- Section 194S requires 1% TDS on every VDA purchase above INR 10,000 per year, with high-volume trading companies accumulating Section 271C penalties rapidly if this is missed.
- From July 2025, 18% GST applies to all crypto platform service fees. Companies operating as validators or node operators carry a separate GST liability on fees charged to third parties.
- Crypto held on foreign exchanges is a foreign asset under FEMA, and non-disclosure in Schedule FA is a Black Money Act violation, not merely an income tax filing error.
Traded All Year? Now File in Minutes.
Get ITR-ready tax reports now.
Is Crypto Trading Legal for Business, Companies and LLPs in India?
Yes, any company or LLP may trade freely through a compliant exchange such as CoinDCX or WazirX. No RBI licence or prior approval is required for domestic exchange-based activity.
That being said, crypto is not legal tender. The RBI does not recognise it as a financial asset and no dedicated parliamentary act governs it yet. Instead, existing law, the Income Tax Act, FEMA, PMLA, and the GST Act, are applicable by extension, and the government has made clear that trading is entirely at the company’s risk.
How Should Indian Companies Record Crypto on their Balance Sheet?
When a company buys crypto, it cannot simply park it under “miscellaneous assets” and move on. The way it gets recorded on the balance sheet determines the cost basis for tax, the impairment treatment, and what auditors will scrutinise first.
The correct accounting treatment depends on the purpose for which the crypto is being held, and the classification comes down to one question: why does the company hold the crypto? Is it being:
- Held for trading or sale, or
- Held as a long-term asset or treasury reserve.
The answer determines how the crypto is accounted for and directly affects the tax and audit outcomes that follow. So here’s how crypto can be written on balance sheets of the companies:
Crypto as Inventory
Companies whose core business is buying and selling VDAs classify them as inventory under AS 2 or Ind AS 2. This applies to active trading desks and broker-dealers.
Under this classification, both price increases and decreases are recognised in profit or loss terms. This reflects the reality of a trading business: the company is not holding for the long term; it is managing a position.
Crypto as an Intangible Asset
Companies that hold VDAs as a treasury reserve or for long-term appreciation treat them as intangible assets. Indian GAAP companies apply AS 26. Ind AS companies apply Ind AS 38.
This treatment is based on the accounting characteristics of VDAs. They meet the intangible asset definition, they are identifiable, non-monetary, and have no physical form. They also have an indefinite useful life, which means they are not amortised. Instead, the company must test them for impairment every year.
Note: No dedicated ICAI guidance note exists for VDAs yet. Companies apply existing accounting standards by default until formal guidance is issued.
Once a company decides to classify VDAs as intangible assets, the next question is how to measure them on an ongoing basis. This is where the choice between two models becomes important.
Cost Model vs Revaluation Model - Which One is Applicable?
For intangible asset classification, two measurement approaches exist. The choice is made once as an accounting policy and applied consistently from that point forward. The model chosen determines how price movements affect the company’s books and how much the balance sheet reflects economic reality.
Cost Model vs Revaluation Model - Which One is Applicable?
Here’s when cost model is applicable:
- VDAs are carried at the original purchase price
- If the market price falls below cost, that fall is recognised as an impairment loss in profit or loss
- If the market price rises above cost, that gain is ignored in the books until disposal
- Most Indian crypto companies use this model by default
Cost Model vs Revaluation Model - Which One is Applicable?
Here’s when revaluation model is applicable:
- VDAs are carried at current fair market value
- Price increases are recognised in Other Comprehensive Income
- Price decreases are recognised in profit or loss
- This model requires an active market to exist for a specific token, which is straightforward for BTC and ETH, but difficult to justify for smaller or illiquid tokens
The revaluation model creates additional disclosure obligations and requires consistent application. Companies that choose it must document the active market basis clearly for every token on the balance sheet.
How is Crypto Disposal Taxed for Business, Companies, and LLPs?
Once the balance sheet classification is set and the cost basis is established, the next question is what happens at the point of sale. This is where most corporate crypto tax errors originate, and two assumptions cause most of them:
- That the standard 22% corporate tax rate applies to VDA gains, and
- That business expenses can be deducted against those gains.
Since neither assumption is correct, how are crypto disposals really taxed for companies, LLPs, and business owners in India?
Rate Applicable to a Company's VDA Gains
Section 115BBH of the Income Tax Act, 1961 taxes all VDA disposal gains at a flat 30%, applicable to companies and LLPs alike. For domestic companies opting for Section 115BAA, a fixed 10% surcharge and 4% cess apply on top, bringing the effective rate on VDA gains to approximately 34.32%.
The 31.2% figure applies to individuals only, where no surcharge threshold has been crossed. Section 115BAA does not apply to LLPs, LLPs are taxed at 30% on non-VDA income, with a 12% surcharge where income exceeds INR 1 crore.
For companies not opting for Section 115BAA, the surcharge varies, 7% where total income falls between INR 1 crore and INR 10 crore, and 12% above INR 10 crore.
What Costs Can a Company Deduct?
As per Section 115BBH(2)(a), only the cost of acquisition is deductible. Consequently, no deduction is allowed for transfer fees, platform charges, electricity, hardware, or any other operating expense unless you are mining crypto as a business. In the case of mined crypto, the cost of acquisition is treated as zero at the mining stage. However, once the crypto is received, its FMV at that time becomes the acquisition cost for calculating gains on a subsequent disposal.
VDA losses from one disposal can neither be set off against gains from another VDA transaction nor adjusted against salary, consulting income, or income under any other head. Moreover, these losses cannot be carried forward to the next financial year.
Most companies accept these restrictions and move on. What they do not account for is a scenario where the tax liability under Section 115BBH triggers even before a single rupee of cash profit is realised, and that is exactly what happens with SAFT token distributions.
What is the SAFT Token Distribution Risk?
A startup that raised capital through a Simple Agreement for Future Tokens (SAFTs) and later distributed them faces a liability that most founders only discover afterward. The taxable event under Section 115BBH is the transfer of tokens, assessed at FMV on the date of distribution, not the original cash consideration received.
If the token has appreciated between the fundraising date and the distribution date, the company owes 30% tax on the FMV difference before realising any cash profit. Remember, no CBDT circular has addressed the SAFT scenario directly. Therefore, the general provisions of Section 115BBH apply in the absence of specific guidance.
For companies that are not distributing tokens but are simply holding and trading VDAs, the SAFT risk does not apply. However, there is one more disposal-stage obligation that applies to every company regardless of structure, and it sits inside the tax computation itself, not in the trade.
Does Minimum Alternate Tax Apply to Crypto Companies?
Minimum Alternate Tax (MAT) under Section 115JB applies to companies at 15% of book profit, i.e., the net profit as shown in the profit and loss account, adjusted for specific additions and deductions prescribed under the Companies Act.
However, where VDA gains are included in book profit but taxed separately at 30% under Section 115BBH, the interaction between MAT and the VDA regime remains unsettled. At present, no CBDT circular has clarified whether VDA gains forming part of book profit should be excluded from the MAT computation.
Accordingly, the conservative position is to include VDA gains in book profit for MAT purposes unless the CBDT notifies a specific exclusion. So, companies should engage a CA before finalising the tax computation, particularly where VDA gains form a significant portion of the annual income.
Now that we have covered how crypto disposals are taxed from a company’s perspective, let’s understand the TDS rates on these disposals.
Traded All Year? Now File in Minutes.
Get ITR-ready tax reports now.
How Does Section 194S TDS Apply to Crypto Business, Companies, and LLPs?
The 30% disposal tax is the obligation most companies plan for. However, Section 194S is the one that catches them off guard. This is because it applies at the point of purchase, not at the point of profit. And for a high-volume trading desk, the penalty for missing it compounds faster than the tax liability itself.
What is Section 194S TDS?
Section 194S requires the buyer to deduct 1% tax at source on the value of every VDA transfer. It was introduced in the Union Budget 2022 alongside Section 115BBH, and it applies regardless of whether the trade resulted in a profit or a loss. But in the case of a company, who is responsible to deduct the TDS?
Who is Responsible for Deducting TDS?
Since the buyer carries the deduction obligation, the responsibility shifts depending on the platform the trade takes place on. On Indian exchanges such as CoinDCX or WazirX, the exchange deducts TDS automatically. TDS on foreign exchanges such as Binance or Bybit, or in OTC and P2P trades, the company must deduct and deposit TDS manually.
TDS is calculated on net consideration, excluding GST and exchange charges, per CBDT Notifications 13/2022 and 14/2022. Knowing who deducts is only half the picture, the threshold and deadline determine when that obligation actually kicks in.
What is the Threshold and Deposit Deadline?
Business, companies, and LLPs are non-specified persons, which means the TDS threshold is INR 10,000 per financial year. And any active trading entity crosses this almost immediately. Once crossed, TDS must be deposited by the 7th of the following month of when it was deducted. Companies must hold a TAN and file Form 26Q within the deposit deadline since missing it even by a day attracts a penalty.
What is the Penalty Exposure for a High-Volume Trading Company?
The Section 271C penalty equals the amount of TDS that was not deducted or paid. For example, if a company executes INR 1 crore of crypto purchases on foreign platforms and fails to comply with the 1% TDS requirement under Section 194S, it could face a penalty of up to INR 1 lakh, in addition to interest and other consequences.
From April 2026, the ITD cross-references TDS deposited against volumes reported by exchanges under Section 509(1) of the Income Tax Act 2025, wherein mismatches trigger automatic scrutiny notices. Interest under Sections 234A and Section 234B applies on top of that penalty, compounding the total exposure further.
TDS covers the purchase side of every trade. But for companies that operate as platforms, exchanges, or validators, there is a third obligation running in parallel, one that applies to the services they charge for, not the assets they trade.
How Does GST Apply to Crypto Business, Companies, and LLPs in India?
TDS tracks what a company buys, while GST tracks what it charges. For companies operating as platforms, exchanges, or validators, these are separate compliance requirements. Each requires its own registration, return filings, and tax payments.
Does GST Apply When a Company Buys or Sells VDAs?
Buying or selling VDAs on your own account does not attract GST. VDAs are not classified as goods or services under the GST Act. GST applies only to services rendered in connection with VDAs, exchange commissions, platform fees, custody charges, and withdrawal fees. So, a company trading its own crypto portfolio owes no GST on those trades.
What GST Does a Crypto Platform or Exchange Owe?
All service fees charged by a crypto platform attract 18% GST from July 2025 under Notification No. 11/2017, Central Tax (Rate), Entry 35. These fees include spot trading charges, margin commissions, futures trading fees, P2P facilitation charges, deposit and withdrawal fees, staking fees charged to users, and wallet maintenance fees. Further, SAC code 997159 applies uniformly across all these services.
Even offshore platforms serving Indian users must register for GST and charge 18% GST on their invoice. This requirement applies even where turnover remains below the INR 20 lakh threshold, as such activities qualify as inter-state OIDAR services.
But what about mining? Does crypto mining and staking also attract GST on a company level in India?
GST on Crypto Staking
A company staking its own treasury crypto earns staking rewards, and no GST arises on this activity since it is not a supply of services to a third party. Income tax applies on those rewards at slab rate on FMV at receipt, and Section 115BBH applies on disposal.
A company operating as a validator or node operator and charging fees for transaction validation is rendering a paid service to third parties. 18% GST exposure exists on those validator fees. The distinction between staking own assets and operating as a paid validator is the critical classification decision for any crypto infrastructure business. A company doing both must segregate its activities clearly, or face a blended classification risk with no clean resolution.
Income tax, TDS, and GST all operate within India’s borders. But many crypto companies also hold assets on foreign platforms, receive payments from foreign clients, or have raised funding from overseas investors. That is where the fourth and most serious obligation begins.
What are the FEMA Implications for Crypto Companies in India?
The Foreign Exchange Management Act (FEMA) does not mention VDAs anywhere in its text. However, for a company with no cross-border crypto activity, that omission is largely irrelevant. Once a company holds crypto on a foreign exchange, accepts payments from foreign clients, or raises investment from overseas, FEMA exposure becomes far more significant. In fact, that regulatory gap is where some of the largest penalties discussed in this guide can arise.
Does FEMA Recognise Crypto as Currency?
As stated above, FEMA does not explicitly mention VDAs or cryptocurrencies. The RBI, in its court filings in IAMAI v. RBI (Supreme Court, 2020), took the position that virtual currencies fail to meet the legal criteria for currency under Indian law.
As a result, crypto is not treated as foreign exchange. However, any cross-border transfer of value involving crypto may still be interpreted as a foreign exchange transaction by the Enforcement Directorate. Hence, the absence of explicit recognition does not create regulatory freedom; instead, it creates regulatory exposure.
What is the Risk of Cross-Border Crypto Transfers?
FEMA categorises all cross-border transactions as either current or capital accounts. Crypto is not listed as a permissible capital account transaction. Acquiring crypto from a foreign counterparty may therefore constitute an unpermitted capital account transaction under Section 3 of FEMA.
Building on this, the Enforcement Directorate has, in several enforcement actions during 2024 and 2025, examined large cross-border crypto transfers through this legal lens. In many such cases, these transactions are treated as non-compoundable, which means they fall under the ED’s enforcement jurisdiction rather than being eligible for RBI’s voluntary compounding route.
Additionally, stablecoin-based cross-border settlements further complicate the position, since they bypass authorised dealer banking channels altogether. As a result, even where the underlying trade is commercially legitimate, the structure of the transfer itself can still create FEMA exposure.
What Happens When a Company Accepts Foreign Client Payment in Crypto?
Export proceeds are required to be realised through authorised dealer banks in accordance with FEMA within the prescribed timelines. However, when crypto payments are received from foreign clients, they do not pass through an authorised banking channel. As a result, no e-FIRA or FIRC is generated, and without these documents, the company is unable to evidence FEMA-compliant export realisation.
This gap does not remain limited to FEMA compliance alone. In fact, it can create a cascading impact on indirect tax treatment as well. Since e-FIRA is typically a key document for substantiating export proceeds, its absence may put GST zero-rating of export services at risk.
The exposure under FEMA is also significant. Under Section 13 of FEMA, penalties may extend up to three times the amount involved, or INR 2,00,000 where the amount is not quantifiable. Additionally, a further penalty of INR 5,000 per day may be applicable till the contravention continues.
What Must a Company Do With Crypto Held on Foreign Exchanges?
Indian resident companies holding crypto on foreign platforms hold foreign assets. Every such holding must be disclosed in Schedule FA of the annual ITR, without exception and without any minimum threshold.
Non-disclosure is not treated as a routine filing omission. It is a violation of the Black Money (Undisclosed Foreign Income and Assets) Act, 2015. Penalties under this can reach 300% of the undisclosed asset value. A company that paid income tax on the gains but omitted Schedule FA remains fully exposed to that penalty regardless.
How Should Crypto Companies and LLPs File Their Tax Returns?
Every obligation covered in this guide, disposal tax, TDS, GST, and FEMA disclosures, has a specific reporting home in the annual return. Knowing which form, which schedule, and which deadline applies to each one is what separates a clean filing from one that invites scrutiny.
Step 1: Compile All Transaction Records
Before navigating to the Income Tax portal, gather documentation for every transaction during FY 2025-26. You will need the following:
- Date and INR FMV of every VDA acquisition and disposal
- Exchange and wallet statements for all domestic and foreign platforms
- TDS certificates and Form 26AS cross-reference for all deductions
- Books of accounts under Section 44AA where business turnover exceeds INR 25 lakh
- Audit report under Section 44AB where turnover exceeds INR 1 crore, calculated as the absolute sum of all profits and losses, not the net figure
- GST invoices issued, GSTR-1 and GSTR-3B returns filed, and ITC records maintained
Step 2: Separate Income by the Correct Head
Each income type maps to a specific head and schedule:
- Gains arising from the disposal of VDAs are taxed under Section 115BBH and must be reported under Schedule VDA in the applicable return.
- Mining income is taxable at the point of receipt at the applicable slab rate and is reported under the Profits and Gains from Business or Profession schedule in ITR-6 or ITR-5.
- Staking rewards are likewise taxable at receipt at the applicable slab rate, with the reporting schedule, PGBP or Other Sources, determined by how the activity is classified for the assessee.
- Fees earned from operating a validator node constitute business income and are reported under the PGBP schedule.
- Where a company gifts VDAs, the transaction is treated as a disposal at fair market value and recorded accordingly in the company’s books. For the recipient, the value of the gifted VDAs may be taxable under Section 56(2)(x).
Step 3: Choose the Correct ITR Form
Once you have categorised your transactions, it is time to choose the right form:
- ITR-5: ITR-5 applies to LLPs, partnerships, and AOPs. It includes Schedule VDA for reporting VDA disposal gains and requires Schedule FA for foreign asset disclosure where applicable.
- ITR-6: ITR-6 applies to all companies, including private limited, public limited, and one-person companies, except those claiming exemption under Section 11. Like ITR-5 this form also includes Schedule VDA for reporting gains from VDA disposals and requires Schedule FA for foreign asset disclosure where applicable.
Step 4: Fill Schedule VDA and Business Income Schedules
Under Schedule VDA, log every disposal individually and mention the:
- Date of acquisition
- Date of transfer
- Cost of acquisition, balance sheet carrying value, or FMV at receipt for earned crypto
- Sale consideration
- Resulting gain
Ensure each entry is separate since lump-sum reporting is not acceptable.
Under PGBP Schedule report all earned crypto income at INR FMV on the date of receipt. This includes:
- Mining income
- Staking rewards
- Validator and node fees
Under Schedule FA, disclose all crypto held on foreign exchanges or in foreign wallets as at 31st March 2026.
Step 5: Reconcile TDS and GST Credits
Cross-check every TDS deduction on domestic exchange disposals against Form 26AS. Verify TDS deposited on foreign exchange and OTC purchases through Form 26Q against the company’s own records.
Reconcile GST output tax with GSTR-1 and GSTR-3B filings. Claim Input Tax Credit on eligible input services where the company renders taxable crypto-related services.
Step 6: Pay and File
Once all calculations and reconciliations are complete, the final step is to make the payment and submit your return accurately. Key filing deadlines for FY 2025-26 (AY 2026-27) are:
- 31st August 2026: ITR-3 and ITR-4 for non-audit business and professional cases only, does not apply to companies or LLPs
- 31st October 2026: ITR-6 for domestic companies and ITR-5 for LLPs, both audit and non-audit cases.
Before filing, ensure any remaining self-assessment tax is fully paid, as the return cannot be submitted otherwise. Moreover, Budget 2026-27 introduces stricter penalties, including INR 200 per day for delayed VDA statements and INR 50,000 for incorrect filing. Therefore, all components must be reviewed before filing.
Every obligation covered in the previous sections VDA disposals, mining income, TDS deposits, GST returns, and Schedule FA, feeds into a different form, a different schedule, and a different regulator. Pulling all of it into a single, accurate filing is where most crypto companies run into trouble. KoinX is built to do exactly that.
How Can KoinX Help Crypto Companies and LLPs With Tax Compliance in India?
When a company holds VDAs on its balance sheet, trades across domestic and foreign exchanges, earns staking or mining rewards, and manages cross-border obligations at the same time, the data volume alone becomes unmanageable through spreadsheets.
KoinX is a global crypto tax platform trusted by over 1.5 million users across 100+ countries, with 800+ exchange and wallet integrations, built to handle precisely this level of corporate complexity for Indian companies and LLPs.
ITR-Ready Schedule VDA Reports for ITR-6 and ITR-5
KoinX generates Schedule VDA reports formatted for both ITR-6 and ITR-5. Every VDA disposal is logged individually with the correct date of acquisition, date of transfer, cost of acquisition, sale consideration, and resulting gain. For PGBP filers, the report maps mining income, staking rewards, and validator fees to the correct income head, ready for your CA to populate directly into the return.
AIS Mismatch Detection Before Filing
Because KoinX imports transaction data directly from connected exchanges, it computes the gross volume figure visible in your AIS and compares it against declared gains in Schedule VDA. Where the ITD’s AIS figure and your reported net gain diverge, KoinX flags the gap and generates a reconciliation note, before a scrutiny notice arrives.
GST Report Generation for Platform and Validator Activity
For companies operating as platforms, exchanges, or validators, KoinX segregates taxable service activity from own-account trading. It generates GST-ready reports covering service fees charged, output tax due at 18%, and eligible ITC, structured to align with GSTR-1 and GSTR-3B filing requirements. The validator-versus-treasury-staking distinction is applied automatically based on transaction type.
KoinX Connect - Automatic Import from 800+ Exchanges
KoinX Connect is an AI-powered agent that fetches transaction data from all connected exchanges and wallets automatically, no manual CSV downloads, no API configuration. For companies active across CoinDCX, Binance, Bybit, and OTC platforms, it consolidates every acquisition, disposal, fee, reward, and transfer into a single tax computation in one step.
Whether your company traded its first VDA this year or manages a treasury across a dozen exchanges, accurate Schedule VDA reporting starts with accurate transaction data. Generate your corporate crypto tax report on KoinX and approach the FY 2025-26 filing deadline with figures that match what the ITD, GST authorities, and FIU-IND already hold.
Conclusion
A crypto company filing only 30% VDA disposal tax while ignoring TDS GST FEMA and Schedule FA is fully exposed across four enforcement frameworks Section 271C penalties for missed TDS on high-volume desks can exceed annual tax liability while Black Money Act exposure on undisclosed foreign exchange can multiply penalties beyond income overall exposure multiplies
Therefore, the only practical response is independent reconciliation of every obligation. KoinX streamlines this process by generating Schedule VDA reports, reconciling TDS credits, identifying potential AIS mismatches, and supporting GST reporting from a single platform. Sign up on KoinX today and give your CA a ready-to-file dataset that brings all your crypto tax and reporting information together in one place.
Frequently Asked Questions
Can a Crypto Startup Receive Foreign Investment in Crypto?
No. Foreign investment must arrive through authorised dealer banks, and FC-GPR must be filed within 30 days of share allotment. No authorised dealer bank leg exists for crypto-denominated investment, meaning a funding round settled in USDT or any other VDA has no recognised FEMA pathway.
Our Company Trades VDAs Daily on Binance. We Have Never Deducted Section 194S TDS. What is Our Total Penalty Exposure?
Your penalty under Section 271C equals 100% of the unpaid TDS on every transaction. On top of that, interest accrues under Sections 234A and 234B on the unpaid amount. For a company executing high-volume trades, this compounds every day TDS was not deposited. File a revised TDS return, deposit the outstanding amount, and apply for voluntary compounding before the ITD initiates proceedings, as early disclosure substantially reduces the final penalty outcome.
We Operate a Staking Validator Node and Charge Fees. Do We Need GST Registration Even If Our Fee Income is Below INR 20 Lakh?
Yes. Validator fee services are classified as OIDAR services under the GST Act. GST registration is mandatory for OIDAR service providers regardless of turnover, the standard INR 20 lakh threshold does not apply. 18% GST applies on every fee charged to third parties for validation services from the date your node began operating commercially. Unregistered liability accrues interest under Section 50 of the CGST Act from the date it was first due.
Can a Crypto Company Offset VDA Trading Losses Against Its Software Consulting Income?
No. Section 115BBH explicitly prohibits the set-off of VDA losses against any income under any head, including PGBP income from non-crypto activity such as software consulting. VDA losses cannot be carried forward, either. Each VDA disposal is assessed in isolation. A company with INR 50,00,000 in consulting profit and INR 30,00,000 in VDA losses pays full tax on both, the losses produce no tax benefit whatsoever.
We are an LLP With Three Partners. One Partner Received Tokens as Their Profit Share. Who Pays Tax When an LLP Distributes Tokens as Profit?
This involves two separate events. At the LLP level, the transfer of tokens to a partner as profit is a VDA transfer, and Section 115BBH applies on any gain above the LLP’s cost of acquisition. At the partner level, the tokens received are income, taxed at slab rate on FMV at the date of receipt as business income from the LLP. Both the LLP and the partner carry independent tax obligations on the same distribution.
Can We Claim an ETH Impairment Loss Against Taxable Income?
No, under Section 115BBH, no deduction is permitted against VDA disposal gains other than the cost of acquisition. An impairment loss recognised in the books on a treasury VDA holding reduces your book profit, and may affect MAT under Section 115JB, but it cannot be set off against other income or carried forward under income tax law. The impairment sits in the accounts but creates no immediate tax benefit.
