Crypto Tax in India: 30% Tax, 1% TDS, Losses and Schedule VDA Explained

What counts as a virtual digital asset?

The Income-tax Act uses the term virtual digital asset rather than cryptocurrency. The definition covers crypto tokens such as bitcoin and ether, non-fungible tokens and similar digitally generated assets, while the government can exclude specific items by notification. The Finance Act, 2025 widened the definition to expressly include crypto-assets that rely on a cryptographically secured distributed ledger or similar technology.

Indian currency, foreign currency and certain notified items are excluded. If you are unsure whether a particular token, reward or in-game item is a VDA, treat that as a question for a tax professional rather than assuming it falls outside the regime.

The new Income-tax Act and what changed in 2025 and 2026

The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the Income-tax Act, 1961. Income earned up to 31 March 2026 (financial year 2025-26) is still governed by the 1961 Act, while income from 1 April 2026 falls under the new Act, which uses the term tax year instead of previous year and assessment year.

The substance of the crypto regime carried over. Under the 1961 Act, the 30% rate sits in section 115BBH and the 1% TDS in section 194S. Under the 2025 Act, the 30% rate for income from the transfer of a VDA appears in the table in section 194, and the 1% TDS appears in section 393(1). You will see both sets of numbers in forms, statements and articles during the transition.

Budget 2025 also brought VDAs within the meaning of undisclosed income for block assessments after searches, and introduced a crypto-asset transaction reporting obligation for prescribed reporting entities from 1 April 2026 (section 285BAA of the old Act, section 509 of the new Act). Budget 2026 kept the 30% rate and 1% TDS unchanged and added penalties for reporting entities that fail to file these crypto-asset statements: ₹200 for each day of delay, and ₹50,000 for inaccurate information that is not corrected or for failing due-diligence requirements. These penalties apply to the reporting entity, not to individual investors, but they mean your platform activity is increasingly visible to the tax department.

The 30% flat tax on VDA gains

Income from the transfer of a VDA is taxed at a flat 30%, plus any applicable surcharge and health and education cess, regardless of your income slab or how long you held the asset. There is no separate short-term or long-term rate and no indexation.

In computing this income, no deduction is allowed for any expenditure or allowance other than the cost of acquisition. That means items such as internet charges, software subscriptions, advisory fees or interest on money borrowed to invest cannot be deducted. Whether particular platform fees can be treated as part of the cost of acquisition is a fact-specific point to confirm with your tax adviser.

Transfer includes selling crypto for rupees, swapping one token for another, and using crypto to pay for goods or services. A crypto-to-crypto swap is a transfer of the token you give up, so it can create taxable income even though no rupees reach your bank account.

Losses: no set-off and no carry-forward

This is the rule that surprises most investors. A loss on the transfer of a VDA cannot be set off against any other income, and the Income Tax Department's guidance states it cannot be set off even against gains from other VDAs. Such losses also cannot be carried forward to later years.

In practice, each profitable transfer is taxed on its own gain, while losses on other transfers are effectively ignored for tax purposes. Keep this in mind before assuming that a year of mixed results means little or no tax.

1% TDS on transfers and the thresholds

A person paying a resident for the transfer of a VDA must generally deduct tax at source of 1% of the consideration. The deduction applies only above certain annual thresholds: ₹50,000 in a financial year where the payer is a specified person, and ₹10,000 for other payers. A specified person broadly means an individual or Hindu undivided family with no business or professional income, or whose business turnover does not exceed ₹1 crore (₹50 lakh for a profession) in the preceding year.

On Indian exchanges, the exchange typically handles the deduction under CBDT guidelines issued in 2022, so you will usually see 1% withheld on sell orders and reported against your PAN. The TDS is not an extra tax: it is a credit you can claim against your final liability when you file your return. It should appear in your Annual Information Statement and tax credit statement on the e-filing portal.

A higher TDS rate can apply if your PAN is not available to the deductor, and a payment made to a non-resident falls under different provisions. If you trade peer-to-peer or with an individual, check who is responsible for deducting TDS before you transact.

Gifts, airdrops and futures

VDAs are included in the definition of property for the gift rules. If an individual receives VDAs and other specified movable property without consideration from non-relatives and the aggregate fair market value in a year exceeds ₹50,000, that value is taxable in the recipient's hands as income from other sources. Gifts from relatives as defined in the Act, on marriage and by inheritance are generally exempt. When a gifted VDA is later sold, the return form provides for the cost to be taken as the value already taxed as a gift, where applicable.

Futures, perpetual swaps and options on crypto are an unsettled area. The Income Tax Department has not issued clear public guidance on whether gains from crypto derivatives fall under the 30% VDA rate or are taxed as business or speculative income at slab rates, and professional opinion is divided. The choice affects deductions and loss treatment, so this is an area to confirm with a tax professional before you file.

Airdrops, staking rewards and similar receipts can also raise questions about when income arises and what the cost of acquisition is. Keep records of the date and rupee value at receipt and get advice if the amounts are material.

Worked example in rupees

Suppose a resident individual buys bitcoin for ₹1,00,000 and later sells it on an Indian exchange for ₹1,50,000. The gain is ₹50,000 (₹1,50,000 minus ₹1,00,000). Tax at 30% is ₹15,000, and health and education cess at 4% adds ₹600, giving ₹15,600 before any surcharge.

On the sale, the exchange deducts 1% TDS of ₹1,500 (1% of ₹1,50,000). When filing, the investor claims this ₹1,500 as a credit, so the remaining tax payable on this gain is ₹14,100.

Now suppose the same investor also sold a different token for ₹30,000 that cost ₹50,000, a loss of ₹20,000. That loss cannot reduce the ₹50,000 bitcoin gain, so the tax on the bitcoin gain stays at ₹15,600. The 1% TDS of ₹300 on the ₹30,000 sale is still available as a credit.

These are simplified round numbers for illustration. Actual figures depend on surcharge, fees, the timing of each transfer and your overall tax position.

Reporting VDA income in your ITR

Income tax returns that can carry capital gains or business income include Schedule VDA. For financial year 2025-26 (assessment year 2026-27), the schedule asks for transaction-level details: date of acquisition, date of transfer, the head of income (capital gains or business income), cost of acquisition and consideration received. The total must match the VDA income reported elsewhere in the return.

Whether VDA income is reported as capital gains or business income depends on the nature and frequency of your activity; the 30% rate applies either way for transfers. Returns for tax years under the Income-tax Act, 2025 will use forms notified under the new Act, so check the current form before filing.

Download complete trade histories, TDS records and deposit and withdrawal statements from every platform you use, including any offshore ones, and reconcile them with your Annual Information Statement before you file.

Ignoring crypto-to-crypto swaps, assuming that netting gains against losses reduces tax, forgetting trades on offshore platforms, and not claiming TDS credits are among the most common errors. With reporting by platforms expanding from 1 April 2026, mismatches between your return and the information the department receives are more likely to be noticed.

Important note

This guide summarises the rules as of October 2026 and is general information, not tax or legal advice. Tax law, forms and thresholds change, and your treatment depends on your circumstances. Consult a qualified chartered accountant or tax professional before making decisions or filing your return.

Frequently asked questions