Crypto Tax in India: Complete 2026 Guide

How is Crypto Taxed in India?

India has one of the harshest crypto tax regimes among major economies. The Finance Act 2022 introduced Section 115BBH of the Income Tax Act: a flat 30% tax on income from the transfer of Virtual Digital Assets (VDAs), with effect from 1 April 2022 (Assessment Year 2023-24). The regime applies regardless of holding period, regardless of total annual income, and without the loss-offset relief available to most other capital-asset classes.

The 30% headline rate is only the start. Add applicable surcharges (10% to 37% for high earners) and a 4% Health and Education Cess on tax plus surcharge. A high-earning Indian crypto trader can face an effective rate above 40%. The 1% TDS (Tax Deducted at Source) under Section 194S applies to every VDA transaction above ₹10,000 — collected by the exchange or buyer at the point of transaction.

The political context: India has long viewed cryptocurrency with deep scepticism. The 2022 budget was widely interpreted as an attempt to discourage retail crypto activity through tax friction rather than outright ban. The result has been a significant migration of Indian trading volume to offshore exchanges, followed by a 2023–24 FIU-IND enforcement effort to bring offshore platforms back into the Indian compliance perimeter.

Section 115BBH — The 30% Flat Tax

The provision is simple, by design:

• Rate: 30% flat on income from VDA transfers, regardless of holding period.
• Deductible: Only the cost of acquisition. No expenses, no transaction fees, no infrastructure costs, no indexation.
• Income aggregation: VDA income does not combine with other income for rate purposes — it is taxed at 30% even if the taxpayer is in a 5% bracket overall.
• Surcharge: Applied based on total income — 10% (₹50L–₹1Cr), 15% (₹1Cr–₹2Cr), 25% (₹2Cr–₹5Cr), 37% (above ₹5Cr).
• Cess: 4% Health and Education Cess on tax plus surcharge.

Worked Example

Priya is a salaried Indian individual with ₹10 lakh salary and ₹2 lakh crypto gain in FY 2024-25:

• Salary tax (under new regime, simplified): ~₹52,500
• Crypto tax: ₹2,00,000 × 30% = ₹60,000
• No surcharge (total income below ₹50 lakh)
• Cess: (52,500 + 60,000) × 4% = ₹4,500
• Total tax: ~₹1,17,000

Section 194S — The 1% TDS

From 1 July 2022, Section 194S requires deduction of 1% Tax at Source on transfers of VDAs. The mechanics:

• Trigger: Any VDA transfer where the consideration exceeds ₹10,000 (₹50,000 for "specified persons" — typically smaller buyers).
• Deductor: The buyer, or in exchange-mediated transactions, the exchange.
• Rate: 1% of the gross consideration (not the gain).
• Crediting: Deducted TDS appears in Form 26AS / Annual Information Statement and is set off against your year-end Section 115BBH liability.

Because TDS applies to gross consideration regardless of profitability, even a loss-making trade triggers TDS deduction. Active traders can find significant working-capital tied up in TDS pending the year-end set-off. Some exchanges have built in TDS optimisation flows; others apply TDS strictly per regulation.

Why You Can\'t Offset Losses in India

This is the most painful feature of the Indian crypto tax regime. Section 115BBH(2) explicitly states:

• No set-off against other income: A loss on a VDA transfer cannot reduce other income (salary, business, capital gains on stocks, etc.).
• No set-off across VDAs: A loss on one VDA transfer cannot offset gain on another VDA transfer. Each transfer\'s gain stands alone at 30%.
• No carry-forward: Unused losses cannot be carried to future years. They simply disappear at year-end.

Practical impact: a trader with ₹10 lakh of gains on some trades and ₹8 lakh of losses on others pays 30% on the full ₹10 lakh (not the ₹2 lakh net). This is uniquely punitive among major economies.

The single workaround: gifts and inheritances of VDAs are generally not "transfers" for Section 115BBH purposes (transfers of property between blood relatives are exempt under Section 56). However, the new owner inherits the original cost basis for future Section 115BBH calculations.

Which India Crypto Transactions are Taxable?

• ✅ Selling crypto for INR — 30% on gain (proceeds − cost), 1% TDS on gross
• ✅ Swapping crypto for crypto — 30% on each side\'s gain, 1% TDS
• ✅ Spending crypto on goods/services — 30% on gain, 1% TDS
• ✅ Receiving crypto as employment income — taxed as salary at marginal rate (not 30% flat)
• ✅ Mining rewards — income at receipt at marginal rate, then 30% on subsequent transfer gain
• ✅ Staking rewards — income at receipt, then 30% on subsequent transfer gain
• ✅ Most airdrops — income at receipt (Section 56), then 30% on transfer gain
• ❌ Buying crypto with INR — not taxable, establishes cost
• ❌ Holding crypto — no taxable event
• ❌ Transferring between own wallets — no transfer
• ❌ Gifting to relatives — exempt under Section 56 (recipient inherits cost)

How to Report in ITR Schedule VDA

From Assessment Year 2023-24, ITR forms include a dedicated Schedule VDA for reporting VDA income. The steps:

1. Compile transaction history across all exchanges. FIU-IND-registered exchanges provide reports designed for Schedule VDA.
2. Calculate gain per transfer: proceeds in INR − acquisition cost in INR. No expenses deductible.
3. List each transfer in Schedule VDA: date of acquisition, date of transfer, head of income, cost, consideration, income.
4. Compute total VDA income — taxed at 30% under Section 115BBH.
5. Claim TDS credit from Form 26AS / AIS to set off against Section 115BBH liability.
6. File ITR-2 or ITR-3 depending on your overall income profile. ITR-3 if you have business income from crypto trading.
7. Filing deadlines: 31 July for individuals not subject to audit; 31 October for audit cases.

Crypto Tax for Specific Activities in India

Mining Income

Mining rewards are treated as "income from other sources" or business income depending on scale. They are taxed at marginal rates at receipt (not flat 30%). When you subsequently transfer the mined coins, the Section 115BBH 30% rate applies to the gain over the receipt value. Mining infrastructure costs are deductible against mining income but not against Section 115BBH transfer income.

Staking and DeFi Yield

Staking rewards and DeFi yield are taxed as income at receipt at fair market value. The income amount becomes the cost basis for the received coins; subsequent transfer triggers Section 115BBH. No specific DeFi guidance exists — conservative practice treats each protocol interaction as a transfer where economic ownership changes.

NFTs

The CBDT has clarified that NFTs are VDAs under Section 2(47A) and subject to the same Section 115BBH and Section 194S regime. NFT artwork by an artist may be classed as "income from other sources" at original creation/sale (if the artist sells from minting).

Crypto Salary

Crypto paid as wages is salary income at INR-equivalent value, taxed at marginal slab rate (not 30% flat). The employer must apply TDS under Section 192 on the equivalent INR value. Subsequent transfer is Section 115BBH.

Foreign Exchange Crypto

The Income Tax Act\'s residence rules apply globally — Indian residents are taxed on worldwide income, including crypto on foreign exchanges. The Liberalised Remittance Scheme (LRS) of the RBI applies to outbound remittances above $250,000/year. Using foreign exchanges does not avoid Section 115BBH for Indian tax residents.

Official Sources & References