📊 Accounting Mastery

Tax Logic: How to Correctly Fill Schedule VDA in ITR-2 and ITR-3 (Part 2)

📅 Feb 21, 2026 ⏱️ 22 min read ✍️ By WealthIQ Crypto

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In Part 1, we established the rules: 30% tax, 1% TDS, and no loss offsets. Now comes the execution. If you don't report your crypto correctly in your Income Tax Return (ITR), you are inviting an automated tax notice. Since 2023, the Indian government has added a dedicated section for us: **Schedule VDA.**

Welcome to Part 2 of the **India Crypto Tax Guide.** Today, we are getting technical. We'll walk you through choosing between ITR-2 and ITR-3, explain why the **FIFO (First-In-First-Out)** method is now the industry standard for calculation, and show you the exact fields in the tax form that determine your final liability. Don't let the paperwork scare you; we've simplified it for the 2026 season.

1. ITR-2 vs. ITR-3: Which one for you?

Choosing the wrong form is a common mistake.

  • **ITR-2:** Use this if you are a "Capital Gains Investor." This means you buy and hold crypto for long-term appreciation. Most retail traders fall here.
  • **ITR-3:** Use this if you are a "Business Income Trader." If you perform 50-100+ trades a day, use bots, or carry out arbitrage, the IT department might consider this a business. In ITR-3, your crypto income is still taxed at 30% flat, but we'll discuss the nuances in Part 3.

2. The FIFO Method: Calculating Your Cost

Since you likely buy the same token at different prices (e.g., BTC at ₹40L, ₹45L, and ₹42L), you must use a consistent method to calculate profit. **The Rule:** In India, the **First-In-First-Out (FIFO)** method is generally accepted. **Example:** If you bought 1 ETH in January and 1 ETH in March, and then sold 1 ETH in May—the purchase price of the January ETH is used to calculate your profit. Not tracking this accurately is the #1 cause of tax overpayment.

3. Filling 'Schedule VDA' Step-by-Step

In your ITR form, locate Schedule VDA. You must provide:

  • **Date of Acquisition:** When you bought the token.
  • **Date of Transfer:** When you sold or exchanged it.
  • **Cost of Acquisition:** The purchase price in INR.
  • **Consideration Received:** The sale price in INR.
Every single profitable transaction must be listed here. For active traders with thousands of trades, we strongly recommend using crypto tax software like **Koinly** or **Binocs** to automate this export.

4. The P2P & Foreign Exchange Trap

If you use Binance or Bybit, there is NO automatic 1% TDS deduction. The IT department knows this. If you buy via P2P and don't deposit the 1% TDS yourself, you are non-compliant. Furthermore, owning assets on a foreign exchange means you must also fill **Schedule FA (Foreign Assets).** Failure to disclose foreign crypto can lead to a ₹10 Lakh penalty under the Black Money Act.

5. The Compliance Shield (Next in Part 3)

The math is done. Now let's build your protection. In the final part, we provide:

  • **TDS Deposit Guide**: How to use the TIN-NSDL portal to pay 1% TDS as a buyer.
  • **Notice Response Blueprint**: What to do if you receive an 'Income/Asset Mismatch' notice.
  • **The 'Family Portfolio' Hack**: Legally reducing your tax burden using family members' lower brackets.
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