NFT and Cryptocurrency Taxation Explained: All You Need to Know in 2025

With the booming popularity of cryptocurrencies and NFTs (Non-Fungible Tokens), a lot of investors are currently inquiring about the taxation of digital assets. If you are a collector, trader, or a creator, you need to be aware of tax implications in order to remain in line with the law. In this article, we will give you the entire guide to taxation rules applicable for NFTs and cryptocurrencies.

What Are NFTs?

NFTs are distinct digital tokens that signify ownership of digital material such as art, music, or video. Unlike cryptocurrencies like Bitcoin, NFTs are unique and possess individual value. Safely stored on blockchain technology, NFTs have changed the manner in which digital ownership is verified, enabling artists, musicians, and creators to capitalize on their work in a decentralized environment.

What Are Cryptocurrencies?

Cryptocurrencies are digital decentralized currencies that don't rely on central banks. Fueled by blockchain technology, cryptocurrencies such as Bitcoin and Ethereum provide a secure, transparent, and efficient means of value transfer across the globe. Decentralization provides tamper-proof transactions and greater privacy.

How Are Crypto Assets Taxed?

In most jurisdictions, including India, crypto assets are considered property for tax purposes and are liable to capital gains tax.

Key Points:

• Capital Gains Tax: Triggered when crypto assets are sold, exchanged, or used to purchase goods/services.
• Holding Period: In India, as per Section 115BBH, gains are charged at a flat rate of 30%, irrespective of the duration for which the asset was held.
• Cost Basis: Original cost of acquisition decides capital gains or losses.
• Mining Income: Cryptocurrency mining can incur income tax because in certain situations, cryptocurrency mining is considered business income.

Taxation Rules for NFTs

NFTs fall under Virtual Digital Assets (VDAs) under the Indian Income-tax Act, and the same regulations as crypto assets govern them.

Major Points:

• Capital Gains: Capital gains arising from the sale of NFTs are subject to a flat rate of 30% under Section 115BBH.
• Creation of NFTs: Business income arises from the sale of self-developed NFTs.
• Royalty Income: Resale royalty income from NFTs is considered income and is taxable.
• TDS at 1% Under Section 194S, a 1% TDS is applicable on NFT transactions to prevent tax evasion.

Key: No deductions other than the cost of acquisition are permitted while computing taxable income from NFTs and cryptocurrencies.

Also Read: Treasure NFT Removed from Apple App Store: Here’s What We Know

Recordkeeping and Compliance

To prevent legal issues, it's essential that taxpayers:

• Keep records of every crypto and NFT transaction.
• Keep track of the cost of acquisition, sale value, and holding period.
• Seek advice from tax experts for proper reporting.

How to File ITR for NFTs and Crypto?

With platforms such as ClearTax, it is now easy to file your Income Tax Return (ITR) for crypto and NFT transactions:

• Go to ClearTax and log in.
• Add your PAN information and Form 16.
• Automatically import crypto transactions from exchanges.
• Check the auto-completed ITR form.
• File your return and get an acknowledgment number.

ClearTax makes tax filing easy, particularly for users with complicated digital asset portfolios.