Real estate tokenization is revolutionizing property investment in India. Investors can now buy fractional ownership in real estate via blockchain-powered digital tokens. But with innovation comes complexity — especially around tax compliance.
This guide will help you:
✅ Understand the types of income from tokenized real estate.
✅ Determine whether your tokens are classified as capital assets or Virtual Digital Assets (VDAs).
✅ File your Income Tax Return (ITR) correctly.
✅ Avoid penalties and maintain compliance.
🔹 Currently not directly regulated by SEBI or RBI.
🔹 May fall under Virtual Digital Asset (VDA) category per Section 2(47A) of Income Tax Act.
🔹 Tax treatment depends on:
🔹 Whether tokens are considered VDAs.
🔹 Whether income is passive (rental, dividend) or active (trading, capital gains).
Tax Head: Income from House Property or Income from Other Sources
Tax Rate: Slab rate after deductions
TDS: 10% under Section 194A
✔️ 30% standard deduction allowed
✔️ Municipal tax and loan interest deductible
If SPV opts for concessional tax: Taxed at your slab rate
If SPV does not opt: May be exempt under Section 10(23FD)
TDS: 10%
Depends on classification:
🟡 If NOT a VDA:
STCG (<24 months): Slab rate
LTCG (≥24 months): 12.5% flat (post July 2024)
🔴 If VDA:
Flat 30% under Section 115BBH
No deductions, no loss set-off
TDS: 1% under Section 194S
| Asset Type | Holding Period | Tax Rate |
|---|---|---|
| Capital Asset Token | < 24 months | STCG – Slab Rate |
| ≥ 24 months | LTCG – 12.5% flat (post Jul '24) | |
| VDA Token | Any duration | 30% flat (Sec 115BBH) |
| Income Type | TDS Rate | Section |
|---|---|---|
| Rental / Interest | 10% | 194A |
| Dividends | 10% | 194 |
| VDA Sale | 1% | 194S |
✅ Token purchase/sale invoices
✅ SPV income distribution reports
✅ Smart contract and legal documents
✅ Platform statement of gains
✅ TDS certificates (Form 16A)
✅ Form 26AS and AIS report
📝 Pro Tip: Create a folder to store all digital and physical documents. This helps in case of an audit.
ITR-2: Capital gains, rental income
ITR-3: If treated as business income
Rental/Interest Income
= Total received − Municipal Tax − 30% std. deduction − Interest on loan
Dividend Income
= Fully taxable if SPV opted for 22% concessional tax
= Exempt otherwise
Capital Gains (non-VDA)
= Sale − Purchase
LTCG taxed @12.5% or 20% (as applicable)
VDA Gains
= Sale − Purchase
Taxed flat 30%; no deductions or exemptions
| Schedule | Purpose |
|---|---|
| Schedule HP | House property income |
| Schedule OS | Other sources (interest/dividends) |
| Schedule CG | Capital/VDA gains |
| Due Date | % of Total Tax Due |
|---|---|
| 15 June | 15% |
| 15 September | 45% |
| 15 December | 75% |
| 15 March | 100% |
Missed it? Pay with interest u/s 234B & 234C
✔️ Submit via https://incometax.gov.in
✔️ Verify via Aadhaar OTP, net banking, or EVC
✔️ Download ITR-V for your records
Bought in June 2022: ₹5,00,000
Sold in July 2024: ₹8,00,000
Gain: ₹3,00,000
LTCG @12.5% = ₹37,500
Bought for ₹2,00,000, sold at ₹3,50,000
Gain: ₹1,50,000
Tax @30% = ₹45,000
TDS of ₹3,500 deducted by buyer/platform
Remaining ₹41,500 to be paid
🔴 Misreporting VDA tokens as capital assets
🟡 Ignoring TDS credits in Form 26AS
🔵 Not classifying rental income correctly
🟣 Missing advance tax deadlines
🟢 No documentation = higher audit risk
🌈 Keep everything digitally organized
🎯 Match your platform reports with Form 26AS
🧮 Use reliable tax software or consult a CA
📅 Don’t wait till last week of July!
| Type of Income | Tax Rate | TDS | Report in ITR |
|---|---|---|---|
| Rental Income | Slab | 10% | Schedule HP |
| Interest Income | Slab | 10% | Schedule OS |
| Dividend Income | Slab / Exempt | 10% | Schedule OS |
| Capital Gains (LTCG/STCG) | 12.5% / Slab | 0% | Schedule CG |
| VDA Gains | 30% Flat | 1% | Schedule CG |
Tokenized real estate is exciting, but tax rules are still evolving. Be extra careful in:
Proper classification (VDA vs. Capital Asset)
Applying correct tax rates
Filing your ITR on time
✅ Stay informed
✅ Keep documents ready
✅ Don’t hesitate to consult an expert