Crypto Currency and Virtual explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Where a company has traded or invested in crypto currency or virtual currency during the financial year, clause (n) of Note 7 to Division II of Schedule III requires disclosure of the profit or loss on those transactions, the amount of currency held as at the reporting date, and any deposits or advances taken from any person for the purpose of trading or investing in crypto or virtual currency.
The requirement
Where the company has traded or invested in crypto currency or virtual currency during the financial year, the following shall be disclosed:
| # | Disclosure |
|---|---|
| (i) | Profit or loss on transactions involving crypto currency or virtual currency |
| (ii) | Amount of currency held as at the reporting date |
| (iii) | Deposits or advances from any person for the purpose of trading or investing in crypto currency or virtual currency |
Item (iii) is the one that catches people
Items (i) and (ii) concern the company's own position. Item (iii) concerns money the company has taken from other people for the purpose of trading or investing in crypto or virtual currency.
That reaches a different kind of business entirely — an intermediary, a platform, a fund vehicle, or any company that has accepted an advance for this purpose. The trigger for the disclosure as a whole is having traded or invested during the year, but item (iii) makes clear that the Schedule is also interested in whose money was at risk, not only whose position it was.
What the disclosure does not do
Schedule III prescribes presentation and disclosure. It does not answer the accounting questions, which remain matters for the Indian Accounting Standards:
- How the holding is classified — inventory, intangible asset, financial asset, or otherwise, depending on the business model and the nature of the holding.
- How it is measured, initially and subsequently.
- Where gains and losses are presented in the statement of profit and loss.
The Schedule III disclosure sits on top of whatever answer the accounting analysis produces. A company cannot satisfy the disclosure by pointing to its accounting policy, and it cannot resolve the accounting by pointing to the disclosure.
Why the disclosure exists in this form
The crypto requirement arrived in the same amendment as benami property, wilful defaulter status and struck-off company relationships — G.S.R. 207(E) dated 24 March 2021. Read as a set, those disclosures share a purpose: surfacing exposures that a conventional balance sheet presentation leaves invisible.
Crypto fits that pattern. A holding may be immaterial in carrying amount and highly material in risk; a company may have taken substantial customer deposits for crypto trading while its own position is small. Neither shows up in the primary statements. The disclosure makes both visible.
Practical preparation
- Establish whether there was any activity at all during the year — the trigger is trading or investing, so a nil disclosure needs a procedure behind it.
- Separate the three items: transaction results, holding at the reporting date, and third-party deposits or advances.
- Identify deposits and advances taken for this purpose, which may sit in ordinary customer or advance balances and not be labelled.
- Reconcile the holding at the reporting date to exchange or wallet records.
- Document the accounting classification separately from the disclosure.
- Consider the related disclosures — a crypto position may also be relevant to undisclosed income, related-party and going-concern considerations.
Where this sits in the wider set
This is one of fifteen items of additional regulatory information inserted into Division II by the 2021 amendment. The others include the four ageing schedules, title deeds not held in the company's name, borrowings secured against current assets, the eleven analytical ratios, and the benami, wilful defaulter, struck-off and undisclosed income disclosures.
Any Schedule III reference that predates 24 March 2021 omits all of them — which is why a guidance note edition matters as much as the Schedule itself.
Compliance checklist
- Test whether there was any trading or investing activity in the year, and document the test.
- Disclose all three items where the trigger is met.
- Search advance and deposit balances for amounts taken for the purpose of crypto trading or investing.
- Reconcile the holding at the reporting date to independent records.
- Resolve classification and measurement under Ind AS separately.
- Cite clause (n) of Note 7 to Division II.
Common mistakes
- Disclosing only the company's own position and omitting third-party deposits or advances.
- Treating the disclosure as the accounting policy.
- A nil statement with no supporting procedure.
- Relying on a pre-2021 Schedule III reference, which contains no crypto requirement at all.