The Income Tax Return (ITR) filing season is in full swing. The process to facilitate corresponding utilities for some ITR forms like ITR-5, 6 and 7 is, however, yet to be completed. The government has so far released utilities for select ITR forms for Assessment Year 2025-26 (AY25-26). More importantly, this time the government has made some changes in some ITR forms to align taxpayers with various new compliance norms.
Since there are 7 ITR forms available for tax return filing, the biggest confusion for most assessses is which form they should choose. Adding to their confusion, the government last year tweaked the capital gains rules, which required certain changes to be made in ITR forms. In this write-up, let’s understand which ITR form you need to file if you have capital gains from various financial assets, including cryptocurrencies.
Filing facility from ITR-1 to ITR-4 started
The Income Tax Department has so far released online and offline utilities for ITR-1, ITR-2, and ITR-4. For ITR-3, the online filing utility with pre-filled data is yet to be released.
Another new change has been seen this year that reporting of capital gains is now possible to some extent in ITR-1 and ITR-4 as well. However, this is applicable only in those cases where the long-term capital gain (LTCG) is less than Rs 1.25 lakh.
Earning from cryptocurrency? Understand which ITR form is required
According to the Income Tax Act, 30% flat tax is levied on earnings from cryptocurrency, NFTs and other virtual digital assets (VDAs). Apart from this, 1% TDS is also deducted on transactions above Rs 50,000 in a financial year.
Now the question is—in which ITR form should such income be shown?
If you are salaried and have income from crypto:
-You should choose ITR-2 form.
-This form covers salary, one or more house properties, capital gains (including crypto), dividends, interest income, foreign income, etc.
– If you have earned more than Rs 1.25 lakh LTCG or any crypto income, avoid ITR-1 and opt for ITR-2.
-If you are a freelancer, professional or trader.
Are you trading crypto regularly or running it as a business?
Then ITR-3 is a must for you.
ITR-3 has a separate section for PGBP (Profits and Gains from Business and Profession), trading, F&O and VDA earnings.
Changes in capital gains reporting as per new rules
This time, special changes have also been made in ITR forms for capital gains reporting. Now the profit earned on selling shares or mutual funds will have to be reported separately “before and after 23 July 2024”.
Earlier, there was no such separate classification, but now due to the change in tax rates, it has become necessary to report it in two parts. These changes are applicable in both ITR-2 and ITR-3.
Traders and business professionals will have to keep these things in mind in ITR-3
Many major changes have been made in the Excel utility of ITR-3:
VDA i.e. crypto income will now have to be entered in more detail.
For capital gains, an option has been given to enter the profit in two parts—before 23 July 2024 and after.
If your income is from business or profession and it includes crypto income, then you will have to show it as profit from business.
Limited changes in ITR-1 and ITR-4
ITR-1 and ITR-4 can now be used even in cases where there is LTCG up to Rs 1.25 lakh from equities.
However, taxpayers with crypto income should avoid these forms as there is no full facility for reporting VDA income here.
Easy way to choose the right ITR form to report crypto income in filing
| Your Type of Income | Right ITR Form |
|---|
| Salary + bank interest only | ITR-1 |
| Salary + one or more houses + capital gains (crypto, mutual funds, equity) | ITR-2 |
| Profession or business + crypto or F&O trading | ITR-3 |
| Small business (presumptive income) + no crypto income | ITR-4 |
Keep these documents ready before filing
Form 16 (for salary)
Form 26AS and AIS reports
Bank and demat statements
Transaction report from crypto exchange
Capital gains calculation statement
Form 16E for TDS deduction in crypto
Last date and advice
Currently, the last date for ITR filing is September 15, 2025 (for non-audited taxpayers). Some reports suggest that this date may be extended further since some ITR utilities are yet to be released. leading to delays in ITR filing by many taxpayers.
If you have made any income from crypto or NFT in FY25, keep in mind that the tax rate is 30% and choosing the right form is extremely important. Salaried taxpayers should file ITR-2 and professionals should file ITR-3. Filing the wrong form may lead to rejection of the return or even a notice. So, choose the right ITR form and report VDA income clearly.
