Indian freelancers receiving USDT for work done for foreign clients face a doubly-stacked tax bill: the receipt is professional income, and the eventual sale is a VDA gain. Both legs are taxed independently.
Leg 1 — receipt as income
When a foreign client pays you 1,000 USDT for software work, that's professional income. You declare it under 'Income from Profession' (or 'Salaries' if employed) at the rupee-equivalent on the date of receipt. Your tax slab applies (5%-30% depending on income).
This is the same treatment as receiving USD via SWIFT, just with a different proof-of-receipt (your wallet history instead of a remittance advice).
Leg 2 — sale as VDA
Now you sell those 1,000 USDT on P2P for INR. Cost of acquisition = the rupee-equivalent on the date you received them (already declared as income). Sale consideration = what P2P paid you. Gain = the difference. Tax: 30% under 115BBH.
If USDT/INR moved in your favour during the holding period, you owe tax on the FX gain. If it moved against you, the loss is unfortunately stranded under the 115BBH no-offset rule.
GST exposure
Foreign-client services are usually zero-rated under GST as exports. Get a Letter of Undertaking (LUT) from the GST portal so you don't have to charge IGST and refund.
Key takeaways
- Receiving crypto as income = slab-rate tax at the date-of-receipt INR value.
- Subsequent sale = 30% VDA tax on the gain since receipt.
- Track the date-of-receipt INR value precisely — it's your cost basis.
- File LUT for export of services to keep GST at zero.
