The world of crypto fundraising has rapidly evolved, with Initial Coin Offerings (ICOs) and Initial DEX Offerings (IDOs) becoming popular ways for new projects to raise funds. In exchange for supporting these projects early, investors often receive new tokens that may appreciate over time. However, while the opportunity seems promising, understanding the tax obligations linked to these transactions is critical in India.
The Indian government views token sales differently depending on how and when you receive or sell the tokens. Taxes apply at the point of earning and when you decide to sell or swap your holdings. Without proper reporting, you could face penalties or missed liabilities. In this guide, we will explain how ICOs and IDOs are taxed in India, how you can calculate the taxes correctly, and how to stay fully compliant while managing your token investments smartly.
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Taxation on Crypto Token Sales in India
ICOs and IDOs offer investors early access to project tokens, but these transactions are not tax-free. In India, taxes apply at different stages — both when you receive the tokens and when you decide to sell or use them. Understanding how each phase is taxed will help you manage your obligations better.
Receiving Tokens from ICOs and IDOs
When you receive tokens through an ICO or IDO, it is treated as income. The fair market value of the tokens on the date you receive them must be added to your total taxable income under the “Income from Other Sources” category. This amount is taxed according to your individual income tax slab, which ranges from 0% to 30%.
Even if you do not sell the tokens immediately, the receipt of the tokens itself creates a taxable event. You are required to declare the fair market value in your Income Tax Return for the relevant financial year.
Disposing Tokens from ICOs and IDOs
When you later sell, swap, or spend the tokens you received, the transaction is treated as a disposal of a virtual digital asset. Any profit made from this disposal is taxed at a flat rate of 30%, along with a 4% health and education cess. The capital gain is calculated as the difference between the selling price and the fair market value of the tokens when you received them.
If the transaction value exceeds INR 10,000 (or INR 50,000 in specific cases) during the financial year, a 1% Tax Deducted at Source (TDS) also applies at the time of sale.
Read More: Ultimate Guide on Crypto Tax in India
How To Calculate Tax on Token Sales in India?
When you deal with ICO or IDO tokens, your tax calculation involves two simple steps — first for receiving the tokens and second for selling or using them. Understanding both parts helps you calculate your tax liability without any confusion.
Calculating Tax on Receiving Tokens
The moment you receive tokens from an ICO or IDO, the fair market value of those tokens becomes taxable income. You must add this value to your annual taxable income under “Income from Other Sources” and pay income tax based on your slab rate.
Here’s the formula to find your taxable amount:
Taxable Income = Number of Tokens × FMV per Token at Receipt |
After finding the taxable amount, apply your income slab rate, which can range between 0% and 30%, to compute the final tax payable for that financial year.
Example:
In March 2024, Aarav, a crypto investor from India, participated in an IDO and received 400 new project tokens. On the day he received them, the fair market value of 1 token was INR 75.
So, the total value of tokens at receipt was:
Taxable Income = 400 × INR 75 = INR 30,000 |
Aarav must add this INR 30,000 to his annual income under “Income from Other Sources” and pay income tax according to his slab rate for the financial year 2024–25.
Read More: How to e-File Your ITR
Tax on Selling or Trading Tokens
When you eventually sell, swap, or spend your ICO or IDO tokens, you will need to pay capital gains tax. The tax is calculated on the profit earned, which is the difference between the sale value and the fair market value at the time of receipt.
Here’s the formula for that:
Capital Gains = Sale Price – FMV at the Time of Receipt |
Once the capital gain is calculated, you must pay a flat 30% tax on it, plus a 4% health and education cess. Also, if the transaction exceeds INR 10,000 or INR 50,000 depending on the case, a 1% TDS will be deducted automatically by the exchange or the buyer.
Example
In February 2025, Aarav decided to sell all 400 tokens. By then, the market value of each token had increased to INR 120, making the total selling price:
Selling Price = 400 × INR 120 = INR 48,000 |
Now, to find his capital gain:
Capital Gains = Sale Price – FMV at Receipt |
Capital Gain = INR 48,000 – INR 30,000 = INR 18,000
Aarav’s capital gain of INR 18,000 will be taxed at a flat 30%, plus a 4% health and education cess. His tax liability will be:
- 30% of INR 18,000 = INR 5,400 (Capital Gains Tax)
- 4% Cess on INR 5,400 = INR 216
Thus, the total capital gains tax he needs to pay is:
Total CGT = INR 5,400 + INR 216 = INR 5,616 |
Additionally, the crypto exchange will deduct a 1% TDS at the time of sale:
TDS = 1% of INR 48,000 = INR 480 |
Aarav can claim this TDS if there is no tax liability upon him.
Read More: Capital Gains Tax on Crypto in India
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How Can KoinX Help With Token Sale Tax in India?
Managing taxes for token sales through ICOs and IDOs can get complicated. KoinX makes it simple by offering a fully automated crypto tax solution. Here’s how KoinX can help you stay compliant while reducing the stress of tax reporting:
Accurate Preview of Capital Gains
KoinX allows you to preview your potential capital gains even before selling your tokens. By analysing fair market values and acquisition prices, it provides an early estimate of your tax liabilities. This helps you make smarter selling decisions while staying fully prepared for tax payments.
Auto-Classification of Transactions
Whether it is a token received from an ICO or an IDO sale transaction, KoinX automatically classifies each event under the correct category. This automation ensures that your records are always accurate, saving you the time and effort needed for manual tracking or adjustments.
Reliable Tax Reports
With KoinX, you can generate complete and reliable tax reports that include all ICO and IDO transactions. These reports cover both your income from receiving tokens and your capital gains from selling them. You can directly use these detailed reports while filing your tax returns without missing any important information.
Portfolio Insights
KoinX gives you a clear view of your entire crypto portfolio, including tokens earned through ICOs and IDOs. You can easily monitor the value of your holdings, track any price changes, and decide when to sell or hold. Proper insights help you optimise your investment strategy and manage your taxes more efficiently.
Advanced Assistance from Experts
If you need help handling complex token sale transactions, KoinX connects you with expert crypto tax consultants. These specialists can assist you with filing your returns accurately, managing large token portfolios, and answering any detailed tax queries to ensure complete compliance.
Stay ahead of your crypto tax obligations — join KoinX today and simplify your ICO and IDO tax calculations easily!
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Conclusion
Investing in ICOs and IDOs can offer exciting growth opportunities, but it is important to understand that every token received or sold carries tax obligations. Reporting the correct income and capital gains is crucial to staying compliant with Indian tax regulations.
If you want to manage your token sale taxes easily and file error-free returns, KoinX is the ideal tool. Join KoinX today and enjoy a smarter, more organised way of handling your crypto taxes.
Frequently Asked Questions
Is Participating In An ICO Or IDO Considered An Investment In India?
Yes, participating in an ICO or IDO is considered an investment in a virtual digital asset. While it offers early access to new tokens, any tokens received are taxable as income, and later disposals are taxed as capital gains. Proper reporting is required to stay compliant with Indian tax laws.
Are Airdropped Tokens From ICOs And IDOs Taxable If I Do Not Sell Them?
Yes, the fair market value of the airdropped tokens must be reported as taxable income under “Income from Other Sources” even if you do not sell them immediately. Simply receiving the tokens triggers a taxable event, and you must add their value to your total income for the year.
Can I Offset Losses From Token Sales Against Other Income?
No, under current Indian tax laws, losses from the sale of tokens received through ICOs or IDOs cannot be offset against other types of income like salary or business profits. Losses from virtual digital assets are isolated and cannot reduce your tax liability in any other category.
What Happens If I Transfer ICO Or IDO Tokens To Another Wallet?
Transferring tokens between your wallets does not create a taxable event. Taxes are only triggered when you sell, swap, or spend the tokens. However, you should maintain clear records showing that the transfer was between wallets you control to avoid any confusion during tax filing.
Are Token Presales Before ICOs Taxed Differently?
No, token presales are treated the same as ICO and IDO participations for tax purposes. If you receive tokens during a presale, their fair market value at the time of receipt must be reported as income, and any later profits on disposal are taxed as capital gains at 30%.
