How crypto tax in India works
Crypto gains in India are taxed at a flat 30% under Section 115BBH of the Income Tax Act, and you generally cannot deduct anything except what you originally paid for the asset. The rules took effect for transfers made on or after April 1, 2022, and they apply whether you trade occasionally or often.
India created a separate category called Virtual Digital Assets (VDAs), which covers crypto and non-fungible tokens. Gains from transferring a VDA are taxed at the special rate in this section rather than at the usual capital gains or slab rates, whether you hold crypto as an investment or trade it as a business. That is why the flat rate applies even if you held the coin for years. (Crypto you receive as salary or as payment for work is a separate matter: it is generally taxed as ordinary income when you receive it.)
This guide explains the main pieces: the 30% rate, the TDS, the loss rules and gifts. From April 1, 2026, the Income-tax Act, 1961 was replaced by the Income-tax Act, 2025, which renumbers these provisions but keeps the same core rules (the 30% rate, the cost-only deduction, no loss set-off and the 1% TDS). This guide uses the 1961 Act section numbers, which are still the most widely quoted. Rates and thresholds can change, so treat this as a starting map and confirm the current position with the Income Tax Department or a chartered accountant before you file.
The flat 30% tax under Section 115BBH
The rate is 30% on the income from transferring a VDA, plus any applicable surcharge and the 4% health and education cess. There is no slab benefit and no lower rate for long-term holding. The rate is the same whether you sold after a week or after three years.
Two details matter more than the headline rate:
- Only the cost of acquisition is deductible. You subtract what you paid to buy the asset. You cannot deduct trading fees, exchange charges, gas fees, internet bills or the cost of a laptop used for trading.
- No adjustment for inflation. Unlike some capital gains rules, there is no indexation benefit here.
So if you buy a coin for ₹1,00,000 and sell it for ₹1,50,000, the taxable gain is ₹50,000 and the tax at 30% is ₹15,000, before surcharge and cess. If you sell at a loss, the loss is not treated as a deductible loss under this section, which brings us to the next point.
Why crypto losses cannot be set off in India
This is the rule people search for most: crypto loss set off in India is not allowed. Section 115BBH says a loss from transferring a VDA cannot be set off against any other income, and it cannot be carried forward to future years.
In practice, that means a bad trade cannot reduce the tax you owe on salary, rent, interest or gains from shares. It also cannot be parked to offset a profitable crypto trade next year. Each transfer stands on its own.
This creates a common trap. Suppose you make ₹2,00,000 profit on one coin and lose ₹1,50,000 on another in the same year. You cannot net them out for this tax. The gain is taxed, and the loss gives you no relief. People who trade frequently often discover this only at filing time, so keep clean records of every buy and sell as you go.
TDS on crypto transfers under Section 194S
Section 194S requires the buyer or the exchange to deduct tax at source when a VDA is transferred. The rate is 1% of the consideration, and it applies above certain thresholds that depend on whether the payer is specified in the rules.
The TDS is not an extra tax on top of the 30%. It is tax paid in advance, and you can credit it against your final liability when you file your return. If too much has been deducted, you can claim a refund.
Keep the TDS certificates and the transaction statements from your exchange. When you file, the credit should appear in your Form 26AS or Annual Information Statement. If it does not, you will need those records to claim it.
Gifts of crypto
If you receive a VDA as a gift, the value can be taxed as income in your hands under the general gift rules, which apply when the value exceeds ₹50,000 in a year. There are exceptions for gifts from close relatives and on certain occasions such as marriage.
If you later sell a gifted asset, the cost of acquisition depends on how the gift was treated. If its value was taxed in your hands as a gift, that taxed value is generally your cost. If the gift was not taxable (for example, from a close relative), the cost is generally what the previous owner paid. That matters because the 30% tax allows only that cost as a deduction, so a low original cost can mean a large taxable gain for you.
What counts as a transfer
The tax applies when you transfer a VDA. Selling for rupees or another currency is the obvious case. Swapping one crypto for another is also generally treated as a transfer, even though no money reaches your bank account. Spending crypto on goods or services is another transfer.
Because each swap can create a separate taxable event, a busy trader can end up with many small gains and no way to offset the losses alongside them. Record the date, the asset, the amount received and the cost for every transaction.
Common mistakes to avoid
- Assuming losses cancel gains. They do not under this section. Plan for tax on profitable trades even in a year when your overall portfolio is down.
- Forgetting swaps. Moving from one coin to another is usually a transfer, not a tax-free exchange.
- Claiming fees as a deduction. Only the cost of acquisition is allowed, so exchange and network fees generally cannot be subtracted.
- Ignoring TDS credit. If you do not claim the 1% deducted, you may overpay and wait longer for a refund.
- Relying on old articles. Rules and reporting formats change. Check the current Income Tax Department guidance and the CBDT’s published material before you file.
Records to keep
Good records make filing simpler and support your numbers if the department asks questions. For each transaction, note the date, the asset and quantity, the rupee value, the buyer or exchange, the fees and the TDS deducted. Keep bank statements and exchange statements too.
If you are new to buying, our guide on how to buy Bitcoin in India covers the practical steps. Whatever platform you use, start your record-keeping on day one rather than reconstructing a year of trades in July.
Filing and getting help
Report VDA income in Schedule VDA of your income tax return (it appears in ITR-2 and ITR-3). If you hold crypto on a foreign platform, ask your adviser whether it also needs to be reported as a foreign asset. Penalties for under-reporting can be significant, so accuracy matters more than speed.
This guide is general information, not tax advice. Rates, thresholds and reporting rules can change, and your situation may involve salary, business income or foreign platforms. Confirm the current rules with the Income Tax Department and consult a chartered accountant before you file.