Taxation of Cryptocurrencies and NFTs in India – The Latest Updates

🔹 Introduction – The Rise of the Digital Asset Economy

Cryptocurrencies and Non-Fungible Tokens (NFTs) have revolutionized the financial world. From Bitcoin to Ethereum, and from digital art NFTs to tokenized real estate, millions of Indians are actively participating in this new asset class.

But with opportunity comes taxation. Since 2022, India has taken a strict stance on crypto taxation:

  • Flat 30% tax on crypto gains.
  • 1% TDS on transactions.
  • No set-off of losses.

As crypto trading grows in 2025, it’s essential for investors, traders, and even casual users to understand how the law applies.

This blog explains the latest crypto tax rules, ICAI insights, practical case studies, and compliance tips for 2025.

🔹 1. Current Provisions of Crypto Taxation

📍 Definition

The Income-tax Act defines “Virtual Digital Assets (VDA)” to include:

  • Cryptocurrencies like Bitcoin, Ethereum, Solana.
  • NFTs (digital art, collectibles).
  • Any other notified digital asset.

📍 Tax Rate

  • Flat 30% on profits from transfer of VDAs.
  • No distinction between long-term or short-term.

📍 TDS Rules

  • 1% TDS on transfers of VDAs above a threshold.
  • Exchanges deduct TDS automatically.

📍 Loss Rules

  • No set-off of crypto losses against other income.
  • Losses from one crypto cannot be set off against another.

Example: If you lose ₹50,000 in Ethereum but gain ₹1,00,000 in Bitcoin, you still pay 30% on the ₹1,00,000 — the loss cannot be adjusted.

🔹 2. GST on Crypto Transactions

While direct tax rules are clear, GST on crypto is still evolving.

  • Exchanges may be liable to pay GST on service fees.
  • Some experts argue crypto trading itself may attract GST if treated as goods/services.

ICAI has advised careful review of GST implications for crypto exchanges.

🔹 3. How Are NFTs Taxed?

NFTs are unique digital assets like art, music, or in-game items.

  • Income from sale of NFTs is taxed at 30% as VDA.
  • If an artist sells an NFT, proceeds are taxable as business income.
  • If an investor resells an NFT, profits are taxed as capital gains under VDA rules.

🔹 4. Case Studies – Practical Scenarios

📍 Case 1 – Retail Trader

Rohit buys Bitcoin for ₹5 lakh and sells it for ₹7 lakh.

  • Profit: ₹2 lakh.
  • Tax @30% = ₹60,000.
  • No deductions allowed except cost of acquisition.

📍 Case 2 – NFT Artist

Priya mints and sells an NFT for ₹10 lakh.

  • Treated as business income.
  • Expenses like design software and marketing can be deducted.

📍 Case 3 – Crypto-to-Crypto Transaction

Anita exchanges Ethereum for Solana.

  • Each transaction is taxable.
  • She must compute gains based on fair market value at the time of transfer.

 Lesson: Every transaction matters — not just cash withdrawals.

🔹 5. International Comparisons

  • US: Crypto taxed as property; gains subject to capital gains tax.
  • UK: Tax depends on whether trading or investing.
  • Singapore: No capital gains tax; business income taxable.
  • India: One of the strictest regimes with flat 30% and 1% TDS.

Implication: India discourages speculative crypto trading but allows disclosure-based compliance.

🔹 6. ICAI’s Role in Crypto Taxation

ICAI has advised the government on:

  • Clearer definitions of VDAs.
  • Simplifying TDS compliance.
  • Training professionals on blockchain and crypto audits.

Chartered Accountants must help clients maintain digital records of wallets, trades, and TDS payments.

🔹 7. Practical Challenges for Taxpayers

  1. Tracking Transactions: Active traders may have thousands of trades.
  2. Valuation: Determining fair market value at time of transfer.
  3. TDS Compliance: Small traders often miss 1% TDS rules.
  4. International Wallets: Complexities with Binance, Coinbase, etc.
  5. Crypto Gifts: Taxable as “income from other sources” if value exceeds ₹50,000.

🔹 8. Smart Compliance Strategies

✅ Maintain records of all trades, wallets, and exchange statements.
✅ Use crypto tax software for accurate reporting.
✅ File under the correct ITR head.
✅ Deduct and deposit TDS on time.
✅ Seek DTAA relief if trading abroad.

🔹 9. FAQs – Common Questions

Q1: Can I set off crypto losses against stock market gains?
👉 No, crypto losses cannot be set off against any other income.

Q2: Is mining income taxable?
👉 Yes, taxable as business income. Expenses (electricity, hardware) are deductible.

Q3: If I gift crypto to a friend, is it taxable?
👉 Yes, if the value exceeds ₹50,000 (unless gifted to a relative).

Q4: Do I need to pay GST on NFT sales?
👉 Yes, if you are in the business of selling NFTs.

🔹 10. Compliance Checklist for Crypto Investors

✅ Track every transaction (crypto-to-crypto included).
✅ Deduct 1% TDS where required.
✅ Pay 30% tax on profits.
✅ Report NFTs separately.
✅ Use DTAA relief if income already taxed abroad.
✅ Keep wallet addresses and blockchain proofs ready for audits.

🔹 Conclusion – Navigating India’s Crypto Tax Landscape

India’s approach to crypto taxation is strict but clear:

  • 30% tax rate.
  • 1% TDS.
  • No set-off of losses.

For investors and traders, this means compliance is unavoidable. Ignoring rules can lead to penalties and even criminal liability.

At the same time, as blockchain adoption grows, India may refine its rules to balance revenue needs with innovation.

Final Message: Treat crypto like any other taxable asset. With proper record-keeping, tax planning, and ICAI guidance, you can stay compliant while participating in the digital asset revolution.

Freelancers & Digital Nomads – Do You Owe Taxes in India?

🔹 Introduction – The Rise of Remote Work

The post-pandemic world has redefined how we work. Millions of professionals are embracing freelancing, remote work, and the digital nomad lifestyle. A freelancer in India may work for clients in the US, Europe, or Australia. Similarly, many Indians are living abroad in Bali, Dubai, or Thailand, working remotely for global companies.

But with freedom comes responsibility — especially tax responsibility. The big question is:
👉 If you’re a freelancer or digital nomad, do you owe taxes in India?

This blog decodes India’s tax laws for freelancers and nomads, covering residential status, income tax rules, double taxation, ICAI insights, and compliance hacks.

🔹 1. Residential Status – The Starting Point

Indian taxation depends not on citizenship but on residential status under the Income-tax Act.

📍 Rules for Individuals

You are considered a Resident in India if:

  • You stay in India for 182 days or more in a financial year, OR
  • You stay in India for 60 days in a year + 365 days in the past 4 years.

Special relaxations exist for Indian citizens working abroad, but the 182-day test is the key.

 Implication:

  • Resident: Taxable on global income.
  • Non-Resident (NRI): Taxable only on Indian-sourced income.

🔹 2. Freelancers Residing in India

If you are a freelancer living in India:

  • Your global income is taxable in India.
  • Payments from foreign clients are taxable under “Profits & Gains of Business/Profession.”
  • You can deduct expenses like internet, software, office rent, and travel.

📊 Example: A Delhi-based graphic designer earns $30,000 from US clients. This income is fully taxable in India. However, expenses like laptop purchase, electricity bills, and co-working space rent can be deducted.

🔹 3. Digital Nomads Living Abroad

If you are living abroad but qualify as a Resident in India (due to the 182-day rule), your global income is taxable in India.

📍 Example: Raj spends 200 days in India and 165 days in Bali, working remotely for a US company. He is still a Resident in India, meaning his US salary is taxable here.

📍 Example 2: Priya spends only 40 days in India in FY 2025. She qualifies as Non-Resident. Only her Indian income (e.g., rent from Indian property) is taxable here.

🔹 4. Double Taxation – DTAA Relief

What if you are taxed both abroad and in India? That’s where Double Taxation Avoidance Agreements (DTAA) come in.

  • India has DTAA with over 90 countries.
  • If you pay tax abroad, you can claim credit in India.
  • The relief may be exemption method or tax credit method, depending on the treaty.

Example: An Indian freelancer living in Germany pays 25% tax there. If India also taxes the same income, DTAA allows credit for German taxes paid.

🔹 5. GST & Freelancers

If your freelance turnover exceeds ₹20 lakh (₹10 lakh in some states), you must register for GST.

  • Services to Indian clients → GST applicable.
  • Services to foreign clients → Treated as export of services, usually zero-rated but requires proper documentation.

Tip: Keep invoices and contracts handy to prove service exports.

🔹 6. ICAI Guidance for Freelancers & Nomads

The Institute of Chartered Accountants of India (ICAI) highlights:

  • Freelancers must maintain digital records of receipts and expenses.
  • They should file ITR under the business/profession head, not salary.
  • Advance tax must be paid if liability exceeds ₹10,000.

Professionals should seek CA advice to avoid penalties.

🔹 7. Practical Tax Hacks for Freelancers

✅ Claim Business Expenses: Internet, phone, laptop, software, home office rent.
✅ Depreciation on Assets: Computers, cameras, office furniture.
✅ Section 80C & 80D Benefits: Investments and health insurance.
✅ Use NPS (80CCD(1B)): Extra ₹50,000 deduction.
✅ Advance Tax Payments: Pay quarterly to avoid interest.

🔹 8. Common Mistakes by Digital Nomads

❌ Assuming that being abroad automatically exempts them from Indian taxes.
❌ Not tracking days in India leading to incorrect residential status.
❌ Failing to use DTAA to avoid double taxation.
❌ Ignoring GST obligations.
❌ Mixing personal and business expenses without clear records.

🔹 9. Case Study – The Bali Freelancer

Arjun, an Indian digital nomad, lives in Bali for 8 months and India for 4 months. He earns $40,000 from clients worldwide.

  • Since he stayed less than 182 days in India, he qualifies as Non-Resident.
  • Only income earned in India (say, ₹3 lakh rent from a Delhi property) is taxable in India.
  • His foreign income is not taxable in India.

 Lesson: Tracking days of stay is critical.

🔹 10. FAQs – Common Questions

Q1: I work for US clients from India. Is income taxable?
👉 Yes, it’s taxable in India as professional income.

Q2: I live abroad but visit India often. When do I become resident?
👉 If you cross the 182-day limit, you become resident and taxable on global income.

Q3: Do freelancers need to pay advance tax?
👉 Yes, if annual tax liability exceeds ₹10,000.

Q4: Can I claim home office expenses?
👉 Yes, proportionate rent, electricity, and internet are deductible.

🔹 11. Compliance Checklist for Freelancers & Nomads

✅ Track residential status each year.
✅ File ITR under business/profession head.
✅ Pay advance tax quarterly.
✅ Register under GST if turnover exceeds threshold.
✅ Use DTAA relief if taxed abroad.
✅ Maintain digital invoices, contracts, and expense proofs.

🔹 Conclusion – Freedom With Responsibility

Freelancing and digital nomadism give unmatched freedom, but taxes follow you everywhere. India’s tax system is based on residency and source of income, not physical location.

  • If you are resident, global income is taxable.
  • If non-resident, only Indian income is taxable.
  • DTAA ensures you don’t pay twice.
  • Compliance with GST, advance tax, and ITR rules is essential.

 Final Message: Freelancers and nomads should not ignore taxes. With smart planning, expense deductions, and treaty benefits, you can minimize tax while staying compliant.

Royalty & Fees for Technical Services – The New Tax Battles

🔹 Why Royalties and FTS Are Tax Hotspots

In the age of globalization and digitalization, cross-border payments for intellectual property (IP), software, and technical services have become the backbone of international business.

But with these payments comes a major question: How should they be taxed?

  • Is a software subscription payment a royalty or just a business expense?
  • When an Indian company pays for cloud services hosted abroad, should it be taxed in India as fees for technical services (FTS)?
  • What if the payment is covered under a Double Taxation Avoidance Agreement (DTAA)?

These questions have sparked some of the biggest tax disputes in India. The Union Budget 2025, judicial rulings, and global frameworks are trying to bring clarity — but uncertainty still looms.

In this blog, we’ll decode the complexities of royalty and FTS taxation, recent court rulings, ICAI insights, and practical implications for businesses.

🔹 1. What Are Royalties and FTS?

📍 Royalty – Section 9(1)(vi) of Income-tax Act

“Royalty” means payment received for:

  • Use of or right to use IP (patents, copyrights, trademarks).
  • Transfer of rights in software.
  • Use of industrial, scientific, or commercial equipment.

📍 Fees for Technical Services (FTS) – Section 9(1)(vii)

FTS includes payment for:

  • Managerial services.
  • Technical consultancy.
  • Professional services.

 Key Difference: Royalty is for use of rights or property. FTS is for services rendered.

🔹 2. Why It Matters Today

In the past, royalty and FTS were mostly linked to manufacturing and industrial sectors. But today:

  • Software subscriptions (Microsoft Office, Zoom, cloud services).
  • Digital advertising fees (Google, Facebook).
  • Online consultancy services.

These payments are common — and tax authorities want their share.

🔹 3. Indian Tax Perspective

📍 Domestic Law

  • Royalty and FTS are deemed to accrue in India if services are used in India, regardless of where the provider is located.
  • TDS (Tax Deducted at Source) obligations apply when payments are made.

📍 DTAA Provisions

  • Treaties often define royalty/FTS differently.
  • Some treaties (like India–US) have narrower definitions, exempting certain payments.
  • DTAA overrides domestic law if more beneficial.

Example: Under India–Singapore DTAA, cloud service payments may not qualify as royalty, but under domestic law, tax authorities may still argue otherwise.

🔹 4. Landmark Judicial Rulings

📍 Software Royalty Cases

  • Engineering Analysis Centre of Excellence (2021): The Supreme Court ruled that payments for software distribution are not royalty unless rights in copyright are transferred.
  • Impact: Huge relief for IT sector, but tax officers continue to challenge SaaS/cloud payments.

📍 FTS and Make Available Clause

  • Many treaties (e.g., India–US DTAA) have a “make available” clause.
  • FTS is taxable only if technical knowledge is made available to the recipient for future use.
  • Example: Online consultancy that doesn’t transfer know-how may not qualify as FTS.

 Lesson: Treaty protection is critical in determining tax liability.

🔹 5. ICAI Guidance & Technical Insights

The Institute of Chartered Accountants of India (ICAI) has emphasized that:

  • Payments for standardized services (like SaaS) should not automatically be classified as royalty.
  • Businesses must carefully review contracts and treaties.
  • Professionals should document nature of services to avoid disputes.

🔹 6. Global Perspective

  • US & EU: Generally treat SaaS as business income, not royalty.
  • OECD Guidelines: Focus on “beneficial ownership” and actual nature of service.
  • India’s Position: More aggressive, often taxing such payments as royalty or FTS.

This divergence creates double taxation risks.

🔹 7. Practical Implications for Indian Businesses

✅ IT & SaaS Companies

  • Outbound payments for licenses may be taxed as royalty.
  • Inbound payments from global clients must be structured carefully.

✅ Startups & SMEs

  • Cloud subscriptions are common — startups must account for TDS obligations.
  • Many fail to deduct TDS on foreign SaaS, risking penalties.

✅ Multinationals

  • Must align contracts with treaty definitions.
  • Should adopt robust transfer pricing (TP) documentation.

🔹 8. Case Study – Cloud Subscription Payment

Scenario:

  • An Indian startup pays $100,000 annually for AWS cloud hosting.

Issue:

  • Is this a royalty (use of equipment/software) or a business service?

Analysis:

  • Under domestic law, tax authorities may argue royalty.
  • Under DTAA (India–US), it may not be royalty.

Outcome:

  • If DTAA applies, startup may avoid TDS.
  • But in practice, many deduct TDS to avoid litigation.

🔹 9. Risks of Misclassification

  • TDS Default Penalties: 30% disallowance of expense + interest + penalties.
  • Double Taxation: If India taxes as royalty but foreign country treats it as business income.
  • Litigation Costs: Long legal battles with uncertain outcomes.

🔹 10. FAQs – Common Questions

Q1: Is every software payment royalty?
👉 No, only if it involves rights in copyright. Standard SaaS is not royalty under Supreme Court ruling.

Q2: What if DTAA says something different?
👉 DTAA overrides domestic law if more beneficial.

Q3: Should startups deduct TDS on SaaS?
👉 Practically yes, unless legal opinion and treaty protection clearly apply.

Q4: Can consultancy fees be exempt from FTS?
👉 Yes, if no know-how is made available (depending on DTAA).

🔹 11. Compliance Checklist for Businesses

✅ Review all foreign payments (software, cloud, consultancy).
✅ Check whether payment is royalty, FTS, or business income.
✅ Refer to relevant DTAA for exemptions.
✅ Deduct TDS where required.
✅ Maintain documentation: invoices, contracts, legal opinions.
✅ For outbound payments, obtain Tax Residency Certificate (TRC) from payee.

🔹 Conclusion – The Road Ahead

Royalty and FTS taxation remains one of the most litigated areas in Indian direct tax law. With digitalization, new disputes will continue to emerge — especially around cloud computing, SaaS, and online consultancy.

  • For taxpayers: Compliance and documentation are critical.
  • For startups: Deduct TDS on cross-border SaaS unless treaty protection applies.
  • For professionals: Stay updated with ICAI guidance and court rulings.

 Final Message: The key to avoiding disputes lies in clear contracts, robust documentation, and correct application of DTAA. Businesses that prepare early will save time, money, and stress.