Crypto Tax in India — 30% Flat Tax Under Section 115BBH on Every Profitable Transfer, No Expense or Loss Set-Off, 1% TDS Under Section 194S, How Airdrops, Staking, Mining, Gifts and Crypto-to-Crypto Swaps Are Taxed, Schedule VDA Reporting, Foreign Exchanges and the Notices That Follow Unreported Trades
Video Explanation & Insights
Buying crypto? Know the income tax before you do
4 videos on this topic
The 2022 regime in one place
Since 1 April 2022 the Income-tax Act treats cryptocurrencies, NFTs and other 'virtual digital assets' (section 2(47A)) under a special code. Section 115BBH taxes income from the transfer of a VDA at a flat 30% — whatever your slab — with only the cost of acquisition deductible: no brokerage, no exchange fees, no gas fees, no interest on borrowed money. A loss on one transfer cannot be set off against the gain on another, against any other income, or carried forward. Section 194S makes the buyer (through the Indian exchange in practice) deduct 1% TDS on the consideration. The Income-tax Act 2025 carries the same provisions from 1 April 2026, and reporting entities (exchanges) now file statements of crypto transactions with the department.
| Event | Tax treatment |
|---|---|
| Sale of crypto for INR | Gain (sale value − cost) taxed at 30% under 115BBH; a loss is ignored |
| Crypto-to-crypto swap (BTC → ETH, coin → stablecoin) | A transfer — the INR value of the coin received is the sale consideration; gain taxed at 30%; the new coin's cost is that value |
| Spending crypto on goods/services | Transfer at the INR value of what was bought |
| Airdrop, staking reward, mining reward, referral bonus, interest on crypto lending | Income from other sources (or business) at slab rate on receipt at fair market value; that value becomes the cost; a later sale is taxed at 30% on the gain |
| Gift of crypto received | Taxable as other income at FMV if it exceeds ₹50,000 in a year from non-relatives; gifts from specified relatives exempt; the donor's cost/holding is not inherited for 115BBH — cost is the FMV taxed |
| Holding without selling | No tax; foreign-exchange and wallet holdings still go in Schedule FA for residents |
| Trading as a business (high frequency, own capital) | Still taxed at 30% under 115BBH with no expenses; the head is business but the rate rule overrides |
| Derivatives and margin trading on crypto | Gains at 30%; losses lost |
The 1% TDS under section 194S
- •Applies to any person paying a resident consideration for a VDA: on Indian exchanges the exchange deducts and deposits it; on peer-to-peer and foreign platforms the buyer must deduct, deposit through Form 26QE (for specified persons) or the regular TDS return, and give the seller Form 16E.
- •Thresholds: no TDS if the aggregate consideration in the year is within ₹50,000 for a 'specified person' (individual/HUF without business income, or with turnover below ₹1 crore / receipts below ₹50 lakh), and ₹10,000 for everyone else.
- •Crypto-for-crypto swaps: both sides are payers; exchanges handle it by deducting 1% on each leg or under the mechanism CBDT prescribed (guidelines of June 2022).
- •The TDS shows in your Form 26AS/AIS and is credited against the 30% tax; a trader with ₹1 crore of trades has ₹1 lakh of TDS sitting there even if the year ended in a loss — it is refundable only through a return.
- •Failure to deduct on P2P deals attracts interest, penalty equal to the TDS and possible prosecution for the buyer; sellers should insist on the Form 16E.
Computing the 30% income
- 1Export every transaction (buy, sell, swap, deposit, withdrawal, reward, fee) from each exchange and wallet for the financial year, with INR values at the time of each event (Indian exchanges give INR; for foreign exchanges use the exchange's USD value and the RBI/SBI rate on the date).
- 2Match sales to purchases lot by lot — FIFO is the accepted method; identify the cost of acquisition for each unit sold.
- 3For each transfer compute sale value − cost; sum only the positive results — that is the 115BBH income. Losses are neither deducted from gains nor carried forward.
- 4Rewards and airdrops: value on the day received goes to 'other sources' at slab; record that value as the cost for the eventual sale.
- 5Tax = 30% of the gains + surcharge (10%/15%/25%… by total income) + 4% cess; the 87A rebate does not apply to 115BBH income; no Chapter VI-A deductions against it.
- 6Advance tax: the gains count in the instalment after they arise; interest under 234C for the earlier instalments is spared only for capital gains, and crypto is not capital gains — so estimate and pay from June.
| Example | Amount |
|---|---|
| Bought 1 ETH for ₹2,00,000; sold for ₹2,60,000 | Gain ₹60,000 → tax ₹18,000 + cess |
| Bought 0.5 BTC for ₹30,00,000; swapped for USDT worth ₹27,00,000 | Loss ₹3,00,000 → ignored; USDT cost = ₹27,00,000 |
| Airdrop of 500 tokens worth ₹40,000 on receipt | ₹40,000 other income at slab; cost ₹40,000 |
| Later sold those tokens for ₹1,00,000 | Gain ₹60,000 at 30% |
| Net for the year | Tax on ₹1,20,000 at 30% = ₹36,000 (+ slab tax on ₹40,000) — the ₹3 lakh loss gives no relief |
Reporting: Schedule VDA, Schedule FA and the notices
- •ITR-2 (investor) or ITR-3 (business): Schedule VDA lists each transfer — date of acquisition, date of transfer, head (capital gains or business), cost, consideration, income; totals flow to the 115BBH computation.
- •Foreign exchanges and self-custody wallets: residents report them in Schedule FA (foreign custodial accounts, VDAs held abroad) with peak and closing balances; non-disclosure is a Black Money Act default with a ₹10 lakh penalty per year.
- •AIS: Indian exchanges report TDS and, from FY 2025-26 onward, transaction statements under the new reporting obligation; CPC compares Schedule VDA totals with them — an empty schedule against reported TDS triggers an e-Campaign message and then a notice.
- •Undisclosed crypto found in a search or reassessment is taxed as undisclosed income under the block/115BBE rules (up to 60% plus surcharge and penalty) since 2025.
- •Earlier years: an updated return (ITR-U) within four years with 25–70% additional tax is the route to regularise missed crypto income before a notice.
- •GST: crypto trading by an individual is not a GST supply; exchanges charge GST on their fees.
Crypto tax: questions we are asked
30% on ₹2 lakh — ₹60,000 plus cess. The ₹3 lakh loss is not set off and is not carried forward.
Yes — a swap is a transfer; Indian exchanges deduct 1% on each side above the threshold.
Yes, at 30% from the first rupee — the basic exemption and the 87A rebate do not reduce 115BBH income, though the exemption can absorb other income.
As a resident, yes — in Schedule FA every year, even with no sale; the 30% tax arises only on transfer.
The same VDA rules — 30% on gains, 1% TDS, Schedule VDA — unless the NFT is a tokenised real asset excluded by notification.
Yes — ledger from exchange exports, FIFO gain working, 194S reconciliation, Schedule VDA/FA and ITR-U for earlier years.