Crypto / VDA Tax India 2026: 30% Flat, 1% TDS, Real Examples
Cryptocurrency and Virtual Digital Assets (VDAs) in India are taxed at a flat 30% (plus surcharge and 4% cess) on profits, with no setoff of losses and no indexation benefit. Every crypto sale triggers 1% TDS under Section 194S. Gifts of crypto over Rs 50,000 are taxable in the recipient’s hands. The rules apply regardless of which exchange you used or whether crypto sat in your wallet. Most Indian crypto holders are unknowingly under-reporting because they think small trades or “loss” exits don’t need declaration — both are wrong. This guide explains every tax angle, with concrete examples for FY 2025-26 filings.
What counts as a VDA for tax purposes
Under Section 2(47A) of the Income Tax Act, a Virtual Digital Asset includes:
- All cryptocurrencies (Bitcoin, Ethereum, USDT, USDC, BNB, all altcoins)
- NFTs (Non-Fungible Tokens) — including art, gaming, profile pictures, ENS domains
- Any other token tradeable on a digital exchange
Stablecoins (USDT, USDC, BUSD) ARE VDAs despite being pegged to USD. Crypto received as airdrops, mining rewards, staking rewards — all are VDAs and taxable at receipt.
The 30% flat tax rule
Section 115BBH taxes gains from VDA transfer at a flat 30% regardless of holding period. Surcharge and 4% Health and Education cess apply on top.
Tax math for a Rs 5 lakh crypto profit:
- Profit: Rs 5,00,000
- Tax at 30%: Rs 1,50,000
- Cess at 4%: Rs 6,000
- Surcharge (if total income > Rs 50L): up to 37%
- Total tax: Rs 1,56,000 minimum (more if surcharge applies)
This 30% is NOT slab-based — it applies whether your total income is Rs 5L or Rs 50L. Even if you’re in the 0% income bracket overall, crypto profits are still taxed at 30%.
The harshest rule: no setoff of losses
Crypto losses cannot be set off against:
- Profits from other crypto trades (each transaction is treated independently)
- Other income (salary, business, capital gains, interest)
- Losses from any other source
And crypto losses cannot be carried forward to future years either.
Real-world impact: if you made Rs 2 lakh profit on Bitcoin and Rs 2 lakh loss on Ethereum in the same year, you owe 30% tax on Rs 2 lakh (Rs 60,000) — you cannot net them. This is the harshest treatment of any investment class in India. Equity, debt, real estate, gold all allow loss setoffs; crypto does not.
1% TDS under Section 194S
Since 1 July 2022, every crypto sale on an Indian exchange triggers 1% TDS on the transaction value (not just the profit). The exchange withholds 1% before crediting INR to your bank.
Example: you sell Rs 1 lakh worth of Bitcoin. Exchange withholds Rs 1,000 as TDS. You receive Rs 99,000 in your bank. The Rs 1,000 appears in your Form 26AS and can be claimed against your tax liability when filing ITR.
Indian exchanges (CoinDCX, WazirX, ZebPay, CoinSwitch) all comply. P2P transactions and foreign exchanges (Binance, KuCoin) don’t automatically deduct TDS — but you’re still liable to deposit it yourself.
How to compute crypto profit
Profit = Sale value – Cost of acquisition. No deductions allowed for:
- Exchange transaction fees
- Network gas fees
- Withdrawal charges
- Internet, electricity, hardware (for miners)
Sale value = INR you actually received. Cost of acquisition = INR you spent to buy the same crypto. For crypto-to-crypto trades (BTC → ETH), the trade is treated as: sell BTC at market value, buy ETH with proceeds. Two separate taxable events.
Specific crypto situations and their tax treatment
Airdrops and free tokens
Taxable at fair market value on the date you receive them (Section 56(2)(x)). If you later sell, the gain is calculated from the FMV at receipt as your cost basis. Receive an airdrop worth Rs 10K and later sell for Rs 25K → Rs 10K is taxed as income at receipt (slab rates) + Rs 15K taxed as VDA gain at 30%.
Staking and mining rewards
Taxed at FMV on date of receipt as business income (if mining/staking is regular) or other income (if occasional). Then any subsequent sale is taxed at 30% on the further appreciation from FMV at receipt.
NFTs
Treated identically to cryptocurrencies. 30% flat tax on profit. 1% TDS on sale. No loss setoff.
Crypto gifts
If you receive crypto worth more than Rs 50,000 from a non-relative in a financial year, the full FMV is taxable as your income (Section 56(2)(x)). Gifts from relatives (spouse, parents, siblings, lineal ascendants/descendants) are tax-free.
Crypto held by NRIs
NRIs with Indian-source crypto income are taxed identically. If crypto is held in foreign wallets and sold while you’re an NRI, only Indian-source gains attract Indian tax — but you must still report under DTAA provisions.
Lost or stolen crypto
Not deductible. If your wallet is hacked or you lose private keys, the loss is not a “transfer” — it doesn’t qualify for any deduction. The cost basis is simply lost without tax benefit.
How to report crypto in ITR
For salaried Indians with crypto activity, use ITR-2 (not ITR-1). ITR-1 doesn’t have fields for VDA income.
In ITR-2:
- Schedule VDA — disclose every crypto transaction with sale date, cost, proceeds, tax computed
- Schedule TDS — claim the 1% TDS deducted by exchanges (visible in Form 26AS)
- Pay any additional tax via self-assessment before filing
The IT Department’s automated matching now cross-checks your Form 26AS TDS entries against your declared VDA transactions. Mismatch triggers a Section 143(1) notice.
Common mistakes and how the IT Department catches them
Mistake 1: Not declaring small trades. Even Rs 5,000 profits must be declared. The IT Dept gets transaction data from Indian exchanges; even small trades show up in AIS.
Mistake 2: Thinking foreign-exchange trades are invisible. India’s CRS (Common Reporting Standard) agreement with most jurisdictions means foreign exchange holdings of Indian residents are reported back. Binance India closed in 2024; remaining users moved to compliant exchanges or KYC-pending platforms. Don’t bet on invisibility.
Mistake 3: Treating long-term crypto as long-term capital gains. There’s no LTCG / STCG distinction for crypto. Whether you held BTC for 3 days or 5 years, profit is taxed at 30%.
Mistake 4: Netting loss against profit. We’ve covered this — explicitly not allowed. Filing ITR with netted figures triggers a Section 143(1) adjustment.
What about crypto received as salary or freelance payment?
If your employer pays you in crypto, the FMV at receipt is taxable as salary at your slab rate. Then subsequent sale is taxed at 30% VDA on further appreciation. Two-stage taxation.
For freelancers receiving crypto: same logic. FMV at receipt is business income (slab rates); subsequent sale gain is VDA at 30%.
Planning strategies (within rules)
- Time exits at FY end if loss: since losses can’t be carried forward, there’s no benefit to delaying a loss-making sale into a future year. Crystallise the trade if you don’t want the position.
- Don’t churn positions: every trade is a taxable event. A buy-and-hold strategy minimises taxable events and 1% TDS friction.
- Use compliant Indian exchanges: P2P and offshore exchanges create reporting complications. Indian exchanges report to AIS automatically — reduces audit risk.
- Maintain transaction records: download CSV exports from your exchange showing every transaction with INR values. Required to compute cost basis accurately.
Verdict
India’s crypto tax framework is among the harshest globally — 30% flat with no loss setoff and 1% TDS on every trade. The framework is designed to discourage trading, and it has worked: Indian crypto trading volume dropped 70%+ since the rules took effect. For long-term holders willing to pay 30% on eventual gains, crypto remains accessible. For active traders, the tax friction makes profitability nearly impossible. Either way: declare every transaction. The IT Department gets exchange data; under-reporting is the fastest way to attract a Section 148 reopening notice. Use ITR-2 with Schedule VDA. ITR filing step-by-step guide.
