Crypto Tax in India — Complete Guide
The full picture on how Virtual Digital Assets are taxed in India — what qualifies, what rates apply, how TDS works, and how to report it.
Last verified: April 2026India taxes crypto profits at a flat 30%, with no way to deduct losses from other cryptos, no long-term rate — and 1% is automatically deducted at source every time you transact on a registered exchange.
The three numbers you need to know
30% — the flat tax on any profit from selling, trading, or transferring a Virtual Digital Asset. This applies from the very first rupee of profit. There is no ₹2.5 lakh exemption for VDA income.
1% — the TDS (Tax Deducted at Source) rate on transactions above ₹50,000 in a financial year. Your exchange deducts this automatically and pays it to the government. You can claim it back as credit when you file your ITR if it exceeds your final tax liability.
4% — the cess (Health and Education Cess) added on top of the 30% tax. So the effective tax rate is 31.2% for most people, before surcharge.
What counts as a taxable event?
A taxable event is anything that qualifies as a "transfer" of a VDA under the Income Tax Act. The key ones:
- Selling crypto for INR — taxable ✓
- Swapping one crypto for another (e.g., BTC to ETH) — taxable ✓
- Using crypto to buy goods or services — taxable ✓
- Receiving crypto as payment for work — taxable as income ✓
- Receiving an airdrop — taxable as income ✓
- Staking rewards received — taxable as income ✓
- Mining rewards received — taxable as business income ✓
- Transferring crypto between your own wallets — generally NOT taxable ✓
- Simply holding crypto — NOT taxable ✓
The loss rule — the most painful part
India's crypto tax has one provision that frustrates investors more than any other: you cannot use losses in one cryptocurrency to reduce gains in another.
Example: You make ₹50,000 profit selling Bitcoin. You make ₹30,000 loss selling Ethereum. Under normal capital gains tax, you would owe tax on ₹20,000 net gain. Under India's VDA rules, you owe tax on the full ₹50,000 Bitcoin profit. The Ethereum loss cannot be used.
VDA losses also cannot be carried forward to the next financial year.
How TDS works in practice
When you sell crypto on CoinDCX, WazirX, or any FIU-IND registered exchange, the exchange deducts 1% of the entire sale value (not just the profit) and pays it to the CBDT on your behalf. This appears in your Form 26AS and AIS. When you file your ITR, this TDS is credited against your total income tax liability.
If you bought ₹1,00,000 of Bitcoin and sold it for ₹1,20,000, the exchange deducts ₹1,200 TDS. Your profit is ₹20,000. Your tax is 30% of ₹20,000 = ₹6,000. Since ₹1,200 TDS was already deducted, you owe an additional ₹4,800 when filing your ITR — and you can claim the balance as a credit if TDS exceeds your liability.
Most Indian crypto investors on registered exchanges have their TDS handled automatically. The key action required is filing ITR-2 (for individuals with capital gains) or ITR-3 (for business income including mining), reporting VDA income in Schedule VDA, and reconciling TDS from Form 26AS. Maintaining transaction records — purchase price, date, sale price — is essential for accurate computation.
Complete taxable event table
| Event | Taxable? | Rate | Notes |
|---|---|---|---|
| Sell VDA for INR | Yes | 30% | On profit (sale price minus cost of acquisition) |
| Swap VDA for VDA | Yes | 30% | Fair market value at time of swap determines gain/loss |
| Pay for goods/services with VDA | Yes | 30% | Deemed transfer at FMV |
| Gift VDA (above ₹50,000) | Yes | Slab rate | Recipient taxed as income; donor has no tax |
| Receive VDA as salary | Yes | Slab rate | Taxed as perquisite at FMV on receipt date |
| Receive airdrop | Yes | Slab rate | Taxed as income at FMV on receipt |
| Staking rewards | Yes | Slab rate | Income at FMV on receipt; subsequent sale at 30% |
| Mining rewards | Yes | Business income | Cost of electricity/hardware may be deductible |
| Transfer between own wallets | Generally No | — | Not a transfer to another person; maintain records |
| Holding VDA | No | — | No wealth tax on VDA currently |
| Buying VDA with INR | No | — | Purchase itself not taxable; records essential |
How to calculate your taxable gain
The taxable gain is: Sale consideration minus Cost of Acquisition. No other deductions are permitted under Section 115BBH. This means brokerage fees, transaction fees, and exchange fees paid at the time of sale are generally not deductible (unlike in equity capital gains where brokerage is deductible). The only deduction is what you originally paid to acquire the VDA.
For assets acquired at different times (different cost bases), India does not specify whether FIFO, LIFO, or average cost applies — this is an area of ambiguity where professional guidance is particularly important.
ITR filing: which form and which schedule
VDA income is reported in Schedule VDA of the ITR. The appropriate form depends on your income type: ITR-2 for individuals and HUFs with income other than business/profession (most crypto investors), ITR-3 for individuals/HUFs with business/professional income (miners, frequent traders classified as business). ITR-1 (Sahaj) cannot be used if you have VDA income.
TDS deducted by exchanges appears in Form 26AS (Tax Credit Statement) and the Annual Information Statement (AIS). Verify these against your exchange transaction statements before filing. Discrepancies should be reconciled proactively — the Income Tax Department matches AIS data with filed returns.
TDS on peer-to-peer transactions
The TDS obligation applies not just to exchanges but to any buyer of a VDA above the threshold. If you sell crypto directly to another person (P2P transaction) for more than ₹50,000, the buyer is legally required to deduct 1% TDS and deposit it with CBDT. In practice, many P2P transactions do not comply with this requirement — but non-compliance creates legal risk for both parties.
India's 30% flat rate with no loss set-off is widely considered punitive compared to other jurisdictions. For comparison: Portugal imposes no capital gains tax on crypto for individuals; UAE has no capital gains tax; even the US allows crypto losses to be set off against gains and carries forward unused losses. Industry bodies including the Internet and Mobile Association of India (IAMAI) and Bharat Web3 Association have repeatedly petitioned for a reduction in rate and allowance of loss set-off. As of April 2026, the government has not changed the framework.
Record-keeping requirements
There is no specific statutory requirement for how long VDA records must be kept, but given that the Income Tax Department can reopen assessments for up to 6 years (or 10 years in certain cases), maintaining records for at least 6 years is advisable. Records to maintain: transaction date, type (buy/sell/swap), asset, quantity, INR value at time of transaction, exchange used, wallet addresses involved, TDS certificates.
Statutory provisions — exact text summary
The VDA tax framework was inserted by the Finance Act 2022, effective from Assessment Year 2023–24 (Financial Year 2022–23 onwards). The key sections:
- Section 2(47A) ITA: Definition of Virtual Digital Asset — any information, code, number or token (not Indian or foreign currency) generated through cryptographic means, including NFTs and notified digital assets
- Section 115BBH ITA: Tax on income from transfer of VDA — 30% flat rate, no deductions except cost of acquisition, no set-off of VDA loss against any other VDA income or any other head of income
- Section 194S ITA: Deduction of tax at source at 1% on payment for transfer of VDA, threshold ₹50,000 (₹10,000 for specified persons)
Source: Finance Act 2022 (No. 6 of 2022). Income Tax Act 1961, Sections 2(47A), 115BBH, 194S. incometaxindia.gov.in
CBDT Circular No. 13/2022 — key clarifications
The Central Board of Direct Taxes issued Circular No. 13/2022 on 22 June 2022, providing 34 FAQs clarifying the VDA tax framework. Key clarifications relevant for taxpayers:
- Mining income is not income from "transfer" under Section 115BBH — it is taxable as business income under the general provisions (Section 28)
- Cost of mining (electricity, hardware depreciation) may be deductible against mining business income
- Airdrops received are taxable as income at FMV on the date of receipt, under the general provisions (not Section 115BBH)
- Gifts of VDA received from non-relatives above ₹50,000 in value are taxable as income under Section 56(2)(x)
- Section 194S applies to exchanges that facilitate the transfer, not just the buyer/seller directly — exchanges are "specified persons" responsible for TDS deduction
Source: CBDT Circular No. 13/2022, 22 June 2022. Available at incometaxindia.gov.in
The "transfer" definition and crypto-to-crypto swaps
"Transfer" under the Income Tax Act (Section 2(47)) includes sale, exchange, relinquishment of the asset, and extinguishment of any rights in the asset. A crypto-to-crypto swap involves an exchange of one VDA for another, which falls squarely within "exchange" — making it a taxable event. The consideration received is the FMV of the VDA received, and the gain/loss is computed against the cost of the VDA given up.
This creates a practical challenge: every DeFi transaction that involves swapping tokens is technically a taxable event requiring computation of gain/loss in INR at the time of the swap. For active DeFi users with hundreds or thousands of swaps, this creates significant compliance burden. Professional crypto tax software that integrates with Indian exchanges and wallet tracking is increasingly used to manage this.
Constitutional validity and judicial position
The 30% tax rate and no-set-off provision have been challenged before various High Courts by industry bodies and taxpayers on grounds of arbitrariness and violation of Article 14 (equality before law). As of April 2026, no court has struck down the provisions. The Bombay High Court, in a 2023 petition, held that taxation of VDAs at a special rate is within Parliament's legislative competence and that the rate, however high, does not make the provision unconstitutional per se.
The Finance Act 2023, 2024, and 2025 each made no changes to the VDA tax framework — signalling the government's continued commitment to this approach despite industry opposition. The Bharat Web3 Association's 2025 pre-budget memorandum requesting reduction to 20% and allowing loss set-off was not adopted in Union Budget 2025.
Source: Bharat Web3 Association pre-budget memorandum 2025. Union Budget 2025 — Finance Bill 2025 (no changes to VDA provisions). CBDT Annual Report 2024–25.