Which accounting method is used for cost basis?

In crypto taxation, tax is levied on sale or transfer of crypto assets.

A crypto trader or person dealing in crypto has various amounts and units of purchases and sales at varying time zones, prices, quantities.

On sale of crypto, to charge tax on gain, cost of acquisition is allowed. However, if purchase unit and sale unit are not tallied, then COA purchase price can be valued as per FIFO (First-In First-Out) or weighted average basis whichever is beneficial to the client.

There would not be major differences between two methods , Generally FIFO is used for ease of calculation .

Let us show you an example for FIFO basis :

On 14-04-2023, on sale of crypto, crypto tax@30% is triggered if there is profit on sale, profit is Sale value reduced by cost of acquisition.

As client sold 15 units, but purchased 10 & 25 units separately, Applying FIFO method of valuation(Unit purchased first are deemed to be sold first ), profit computation is as below:

As there is a profit of Rs.400, trader is required to pay tax @30% for this particular transaction i.e Rs.120/- and to be disclosed in income tax return .