Cryptocurrency gains in India are taxed under a special regime that is deliberately simple and deliberately harsh: a flat rate, a single permitted deduction, no loss relief, and tax deducted at source on every transfer. The regime was introduced by the Finance Act, 2022, under sections 115BBH and 194S of the Income-tax Act, 1961, and it treats virtual digital assets, including cryptocurrencies and NFTs, as a separate category of income. This guide explains the four rules, works the calculation in rupees with the tax, the cess, and the TDS credit shown separately, and explains what is not deductible, what happens to losses, and how the income is reported. It is general information about the law as it stands, not tax advice for any individual transaction, and the figures should be checked against the current law and your own records before filing. Surcharge, where it applies, is additional to the figures shown, and the examples state that plainly.

The 30 percent rule: what is taxed, and what is a VDA

Section 115BBH taxes income from the transfer of a virtual digital asset, VDA, at a flat 30 percent. A VDA is defined in section 2(47A) and includes cryptocurrencies such as Bitcoin and Ether, non-fungible tokens with limited exceptions, and other digital tokens generated through cryptographic means, while excluding Indian and foreign currency, and, subject to notification, certain gift cards and redeemable points. The Reserve Bank digital currency is excluded from the definition. The tax applies to income from transfer, meaning a sale, exchange, or other disposal for consideration, and the gain is computed as the full value of the consideration received less the cost of acquisition. Holding a VDA, without transferring it, is not taxed under this section, however much its value rises. The tax event is the transfer, and the valuation is at the transfer.

The flat rate is the defining feature of the regime, and it removes every feature of the ordinary capital gains system. There is no holding-period distinction: a gain on a coin held for a day and a gain on a coin held for a decade are taxed at the same 30 percent. There is no indexation benefit, no concessional rate for long-term holdings, and no benefit of the basic exemption limit or the slab rates against this income: the 30 percent applies from the first rupee of gain, even for a taxpayer whose other income is below the taxable limit. The rate is plus applicable surcharge and 4 percent health and education cess, so the effective rate on the gain is 31.2 percent before any surcharge, and higher where surcharge applies. The examples in this guide show the 30 percent tax and the cess separately, and state that surcharge is additional, so the arithmetic is transparent.

The Income-tax Act, 2025, in force from 1 April 2026, carries the same 30 percent framework forward under renumbered provisions, and references in current guidance still commonly use the 1961 Act section numbers, 115BBH and 194S, which this guide uses. The economics are unchanged across the transition: the same flat rate, the same single deduction, the same loss prohibition, and the same TDS. A taxpayer filing for an earlier year stays under the 1961 Act provisions for that year, and a taxpayer filing under the new Act should confirm the renumbered provision references in the return form and the CBDT comparison material. The section numbers change. The calculation does not.

The calculation: consideration minus cost, times 30 percent

The calculation has three steps. First, establish the full value of the consideration received for the transfer, in rupees, including any consideration received in kind, such as another VDA, valued at its rupee value at the time of transfer. Second, subtract the cost of acquisition, the rupee cost of acquiring the VDA transferred, and nothing else. Third, apply 30 percent to the resulting income, then add 4 percent cess on the tax, and surcharge where applicable. If the consideration is less than the cost, the result is a loss, and the loss is dealt with under the loss rule in its own section: it is not deducted anywhere, and it is not carried forward. The calculation is performed transfer by transfer, and the tax on each profitable transfer is computed independently.

Cost of acquisition is the only deduction, and the word only should be taken literally. Exchange fees, platform charges, gas fees paid on a blockchain network, brokerage, advisory charges, internet and electricity costs, software subscriptions, and the cost of professional advice for filing are all non-deductible against VDA income, however directly they relate to the transaction. The restriction is statutory, in section 115BBH, and it makes the effective tax burden higher than the headline rate suggests, because the real economic profit, after all costs, is taxed on the larger figure of consideration minus purchase cost alone. A trade that is barely profitable after fees can be taxable on a gain that the fees have already consumed. The record to keep, for every transfer, is therefore the consideration and the cost, in rupees, with dates, because those are the only two figures the computation uses.

Where a VDA was acquired in parts, at different prices, the cost of the portion transferred must be identified from the acquisition records, and the method used must be consistent and documented. Exchanges commonly report average cost or first-in-first-out cost, and the return schedule requires transaction-level detail, so the acquisition history must be reconstructable from exchange statements and wallet records. Where a VDA was received as a gift, the cost treatment follows the general gift and acquisition rules, and professional advice should be taken, because the cost that the recipient may claim, and the treatment of the gift itself, are not settled by the transfer calculation alone. Where a VDA was received through mining, staking, or an airdrop, the receipt itself may be income under other provisions, and the cost and transfer treatment should be advised on separately. This guide covers the transfer calculation for purchased VDAs, which is the common case, and flags the other cases as advice territory rather than guessing at them.

Worked examples: a gain, a loss, and two trades

Example one, a single profitable trade. An investor buys a VDA for 7,50,000 rupees and later sells the whole holding for 10,00,000 rupees. The consideration is 10,00,000 rupees, the cost of acquisition is 7,50,000 rupees, and the income is 2,50,000 rupees. Tax at 30 percent is 75,000 rupees. Cess at 4 percent of the tax is 3,000 rupees. The total, before any surcharge, is 78,000 rupees. The 1 percent TDS deducted on the consideration, 10,000 rupees, is credited against this liability, leaving 68,000 rupees to be paid with the return, before surcharge. The investor keeps 10,00,000 rupees of sale proceeds, has paid 10,000 rupees in TDS, and owes a further 68,000 rupees, for a total tax cost of 78,000 rupees on a 2,50,000 rupee gain. The effective rate on the gain, before surcharge, is 31.2 percent.

A single profitable VDA transfer, in rupees.

Example two, two trades, one gain and one loss. Trade A gains 1,00,000 rupees. Trade B loses 60,000 rupees. The tax is computed on Trade A alone: 30 percent of 1,00,000 is 30,000 rupees, plus cess of 1,200 rupees, giving 31,200 rupees before surcharge. The 60,000 rupee loss on Trade B is not set off against the gain on Trade A, is not set off against salary or any other income, and is not carried forward to a later year. The investor pays tax on the full 1,00,000 rupee gain while absorbing the full 60,000 rupee loss, for a net economic profit of 40,000 rupees taxed as if it were 1,00,000 rupees. That asymmetry is the harshest feature of the regime, and it is the reason position sizing and record-keeping matter more in Indian crypto trading than the headline rate alone suggests: every profitable transfer is taxed in isolation, and no loss ever shelters a gain.

Example three, a loss-making sale with TDS. An investor buys for 9,50,000 rupees and sells for 9,00,000 rupees, a loss of 50,000 rupees. No income tax is payable on the transfer, because there is no gain, and the loss is not usable anywhere. But TDS of 1 percent is still deducted on the consideration, 9,000 rupees, because TDS applies to the consideration, not the gain, above the thresholds. The TDS is credited against the total tax liability for the year, and where there is no liability to absorb it, it is claimed as a refund in the return. The cash-flow lesson is general: TDS is deducted even on loss-making and break-even sales, and a trader with many transfers can accumulate substantial TDS credits that are only recovered at filing time. The TDS is not lost, but it is not available until the return is processed.

1 percent TDS: thresholds, credit, and cash flow

Section 194S requires tax to be deducted at source at 1 percent of the consideration paid for the transfer of a VDA to a resident. On exchange-traded transactions, the exchange generally deducts and deposits the TDS. In peer-to-peer trades and on offshore platforms, the buyer is responsible for deducting and remitting it, through Form 26QE where the specified-person rules apply. No TDS is required where the aggregate consideration in the financial year does not exceed 50,000 rupees for specified persons, meaning individuals and Hindu Undivided Families not subject to tax audit, or 10,000 rupees for other payers. Once the threshold is crossed, TDS applies to the consideration, and the threshold is an aggregate annual figure, not a per-transaction exemption.

The TDS is a credit, not an additional tax. It is reflected in Form 26AS and the Annual Information Statement, it is credited against the final tax liability computed at 30 percent plus cess and surcharge, and any excess is refunded. But because it is deducted on the gross consideration, it can exceed the tax on the gain, as the worked examples show: a sale of 10,00,000 rupees with a gain of 2,50,000 rupees attracts TDS of 10,000 rupees against a tax liability of 78,000 rupees, which is manageable, while a sale with a thin gain attracts TDS that may exceed the tax several times over, recoverable only at filing. Traders should reconcile the TDS credits in the AIS with their own trade records before filing, because a missing or mismatched credit is a common cause of an incorrect demand, and the exchange statements, the AIS, and the return schedule must agree.

Where the payee is a non-resident, tax is deducted under section 195 rather than section 194S, at the applicable rates, and the payer obligations differ. Where the consideration is paid in kind, in another VDA or in goods or services, TDS must still be discharged, in the manner the rules prescribe for non-cash consideration, and the valuation of the consideration in rupees at the time of transfer decides both the TDS and the gain computation. Barter and crypto-to-crypto exchanges are transfers for both purposes: exchanging one VDA for another is a transfer of each, and the gain on each leg is computed separately. A portfolio rebalance that moves value between coins without any rupees changing hands is still a taxable event in India, and it still attracts TDS. The absence of cash does not remove the tax.

Losses: no set-off, no carry-forward

Section 115BBH prohibits the set-off of a loss from the transfer of a VDA against income under any other head, and against income from the transfer of another VDA, and it prohibits carrying the loss forward to a later year. The prohibition is absolute within the section, and it applies whether the loss arises on the same day as a gain or in a different year, and whether the two VDAs are similar or entirely different. A loss on Bitcoin does not shelter a gain on Ether. A loss in one financial year does not shelter a gain in the next. The loss expires in the year it arises, unused, and it is not recorded as a carried-forward loss in the return. The return schedule reflects this: each transfer is reported, the gains are taxed, and the losses are disclosed without relief.

The practical consequences follow directly. First, tax must be budgeted trade by trade, not on the net portfolio result: a year that ends flat overall can still produce a large tax bill if the gains and losses are in different transfers. Second, loss harvesting, the ordinary technique of realising losses to shelter gains, does not work for VDAs in India, and realising a loss to crystallise it gains nothing. Third, the record for a loss-making transfer must still be kept and reported, because the schedule requires the transaction detail, and because the TDS credit on the sale must be reconciled, even though the loss itself gives no relief. The regime taxes gross gains and ignores net economics, and any trading strategy that assumes netting will fail at filing time.

Reporting: Schedule VDA and records

VDA income is reported in Schedule VDA of the income tax return, which requires, for each transfer, the date of acquisition, the date of transfer, the cost of acquisition, and the consideration received, with the income computed transfer by transfer. Salaried individuals with VDA income generally file ITR-2, while those with business income file ITR-3, and the schedule feeds the tax computation at the flat rate. The TDS deducted under section 194S is reported separately, credited from Form 26AS and the AIS, and the AIS reporting by exchanges means the department already holds a record of the transactions: the return must reconcile with it, and mismatches between the AIS, the exchange statements, and the schedule are a common trigger for automated notices and reassessment. Reconcile before filing, not after a notice arrives.

Records should be kept for every acquisition and transfer: exchange statements, wallet addresses and transaction hashes, dates, quantities, rupee values at the time of each transaction, fees paid, and TDS certificates and credits. The rupee value at the time of transfer is the figure the computation uses, and it must be reconstructable from the records, using the exchange rate or price source actually applied, consistently. Where records are incomplete, reconstruct them from exchange downloads and blockchain records before filing, and keep the reconstruction with the return papers. The department reporting framework for VDA transactions continues to develop, including exchange reporting obligations, and the return forms and schedules should be checked in the filing year, because the reporting mechanics change faster than the 30 percent rate.

Gifting and inheritance of VDAs, and VDAs held on foreign exchanges, raise separate questions that this guide does not decide. A gift of a VDA may have gift-tax and cost consequences for the recipient, and the recipient cost treatment should be advised on. Holdings on foreign exchanges must be considered for foreign asset disclosure requirements, which apply to resident taxpayers holding specified foreign assets, and non-disclosure carries its own penalties. The transfer tax described here is only one part of the compliance picture for a taxpayer with foreign holdings, and the whole picture should be reviewed together, by a professional, before the return is filed.

Mistakes: fees, holding periods, and foreign exchanges

The first mistake is deducting fees. Only the cost of acquisition is deductible, and every fee, however necessary, is excluded. A calculation that deducts exchange fees, gas fees, or brokerage understates the tax and will not survive scrutiny. The second mistake is applying a holding-period distinction that does not exist: there is no long-term concessional rate for VDAs, and a gain held for years is taxed exactly like a gain held for a day. The third mistake is netting losses against gains, in the return or in the trader own records, which produces a tax figure that is too low by the tax on the losses, and which the schedule will not accept.

The fourth mistake is treating a crypto-to-crypto exchange as a non-event. It is a transfer, it is taxed on the gain, and it attracts TDS. The fifth mistake is treating an offshore exchange as outside Indian tax: residence, not the location of the exchange, decides liability for a resident taxpayer, and the TDS and reporting obligations follow the taxpayer. The sixth mistake is ignoring the TDS credit, either by failing to reconcile it in the AIS, which overpays the tax, or by treating it as the whole tax, which underpays it, since the TDS at 1 percent of consideration is far below the 30 percent tax on a profitable gain. Compute the tax transfer by transfer, reconcile the TDS, report in Schedule VDA, and take professional advice where the facts are not the simple purchase-and-sale case this guide covers.

Frequently asked questions

What is the tax rate on crypto in India?

Income from transferring a virtual digital asset is taxed at a flat 30 percent, plus applicable surcharge and 4 percent health and education cess, under section 115BBH. The effective rate before surcharge is 31.2 percent. There is no slab-rate benefit, no long-term concessional rate, and no basic exemption against this income.

How is crypto tax calculated in India?

For each transfer, subtract the cost of acquisition from the full value of the consideration received, and apply 30 percent to the resulting income, plus 4 percent cess and any applicable surcharge. Only the cost of acquisition is deductible. For example, a sale for 10,00,000 rupees with a cost of 7,50,000 rupees gives income of 2,50,000 rupees and tax of 78,000 rupees before surcharge, against which the 1 percent TDS of 10,000 rupees is credited.

Can crypto losses be set off in India?

No. Losses from transferring a virtual digital asset cannot be set off against any other income, cannot be set off against gains on another virtual digital asset, and cannot be carried forward to a later year. Each transfer is taxed on its own gain, and each loss expires unused. A year with equal gains and losses in different transfers is still taxed on the full gains.

What is the 1 percent TDS on crypto in India?

Section 194S requires 1 percent tax deducted at source on the consideration for transferring a VDA, where the aggregate consideration in the financial year exceeds 50,000 rupees for specified persons or 10,000 rupees for others. The TDS is deducted on the gross consideration, not the gain, and it is credited against the final tax liability or refunded. On exchanges it is generally deducted automatically; in peer-to-peer trades the buyer is responsible.

Are crypto futures taxed differently in India?

This guide covers spot transfers of virtual digital assets under the 30 percent VDA framework. Leveraged and derivative positions, including futures and perpetual contracts, raise separate questions, including whether gains are business income and how the VDA transfer rules apply to each leg. Do not assume the spot calculation covers them. Take professional advice before filing on derivative positions.

How do I report crypto income in my ITR?

Report each transfer in Schedule VDA of the income tax return, giving the date of acquisition, date of transfer, cost of acquisition, and consideration for each transaction. Salaried individuals generally file ITR-2 and those with business income file ITR-3. Report the section 194S TDS separately and reconcile it with Form 26AS and the Annual Information Statement before filing.