Using Stablecoins For Salary Payments: Reporting Crypto Income Under Current Tax Codes

In India, receiving salaries in crypto is fully taxable. The Fair Market Value (FMV) of the crypto on the date of receipt is treated as income and taxed as per the individual's applicable income tax slab. In the case of stablecoins, despite their price stability, the Indian tax authorities treat them similarly to other crypto. If these assets are later converted to INR or swapped for other tokens like Bitcoin, any resulting gains from exchange rate fluctuations are considered capital gains.

Such profits are taxed 30% flat tax under Section 115BBH, along with a 4% health and education cess as per Edul Patel, Co-founder and CEO of Mudrex. It's important for individuals receiving crypto salaries to maintain clear records of transactions for accurate tax reporting and compliance.

As crypto adoption rises globally, a growing number of startups and tech firms in India are exploring stablecoins-like USDT and USDC-for paying salaries. Their appeal lies in instant cross-border transfers, low transaction fees, and protection from fiat currency volatility. However, this convenience comes with critical tax considerations.

Under current Indian tax laws, salary received in stablecoins is classified as income and taxed as per the individual's income slab under the Income Tax Act, 1961. The fair market value of the crypto asset on the day of receipt-converted into INR-is considered taxable. Employees must report this income clearly, even if the asset isn't converted into fiat immediately, as per Sathvik Vishwanath, Co-founder and CEO of Unocoin.

Example:

Suppose you received USDT 1,000 as salary on July 1, 2024, when the FMV was Rs 85,000. This Rs 85,000 is taxed as salary income (as per your slab). Now, if you sell that USDT for Rs 88,000 later, the Rs 3,000 gain is taxed separately at a flat 30% as crypto income, plus surcharge and cess.

With the lack of specific GST guidance, employers need to maintain proper books, deduct TDS, and issue payslips mentioning crypto payments alongside INR equivalents. Misreporting or non-disclosure could attract penalties under anti-evasion measures.

Crypto Income for Indian Professionals: How to Report Salary & Capital Gains?

Salary received in stablecoins (like USDT / USDC) is fully taxable as "Income from Salary" under the Income Tax Act. The fair market value (FMV) of the crypto on the date and time of receipt is treated as the salary amount. If the employer is Indian, then they are required to deduct TDS under Section 192 on this FMV and report it in Form 16.

According to Sonu Jain, CRCO, 9Point Capital, when the employer is based outside India (very common in Crypto or Web3 roles), TDS may not be deducted. In such cases, the onus is on the employee to report the income accurately and it is also the responsibility of the employee to retain employment contracts, payslips, wallet addresses, and FMV records to substantiate the salary claim.

Later, if the employee sells the received crypto, any gains are taxed at a flat 30% as VDA Income under section 115BBH, and must be reported under Schedule VDA in the ITR. TDS under Section 194S at 1% will also be deducted at the time of sale, Sonu Jain stated further.

The use of stablecoins for salary payments is a clear indication of how crypto assets are beginning to play a more meaningful role in everyday financial transactions. Stablecoins offer the dual advantage of blockchain-based efficiency and price stability. This makes it a natural fit for cross-border salary disbursements and digital-native compensation models. At Giottus, we see this trend as part of a broader global shift toward programmable money and decentralised value transfer, said Vikram Subburaj, CEO, Giottus Crypto Platform.

However, it is critical that both employers and employees in India understand the current tax implications of receiving compensation in crypto (Bitcoin, Ethereum, or a fiat-pegged stablecoin). Under the existing tax code, virtual digital assets (VDAs) are taxed at a flat 30% rate on profits, with no provision to offset losses or claim deductions. In the case of salary in crypto, the fair market value (FMV) of the crypto asset on the date of receipt is considered and taxed as per the individual's applicable tax slab.

Even if a stablecoin maintains parity with INR, its classification as a VDA under section 2(47A) of the Income Tax Act brings it under the same taxation regime. This means that salaries paid in stablecoins are taxed as income, and any subsequent sale or conversion may attract additional tax liabilities depending on the price differential at that point in time.

Clarity, compliance, and proper documentation are key. Indian crypto earners should maintain detailed transaction records and consult qualified tax professionals to ensure adherence to reporting norms. While the tax treatment of crypto salaries may evolve as regulations mature, for now, the onus is on the taxpayer.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.