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Crypto Tax in India: 30% Tax, 1% TDS & ITR Filing Explained

India's crypto tax rules are some of the strictest for any asset class, and the two numbers that matter most — 30% and 1% — catch a lot of first-time crypto investors off guard, mainly because of what they don't allow: no loss set-off, no cost deductions beyond purchase price, no exemption threshold. Here's how it actually works for FY 2025-26 (AY 2026-27).

The 30% flat tax: Section 115BBH

Any gain from transferring a Virtual Digital Asset (VDA) — Bitcoin, Ethereum, other cryptocurrencies, NFTs and similar tokens — is taxed at a flat 30%, plus a 4% health and education cess, under Section 115BBH of the Income Tax Act. That's an effective minimum rate of about 31.2% on the gain.

• There's no slab benefit. It doesn't matter whether your total income is \u20b93 lakh or \u20b930 lakh — the crypto gain is taxed at 30% either way.
• There's no distinction between short-term and long-term holding, unlike equity or property.
• Only the cost of acquisition can be deducted from the sale value. Exchange fees, gas fees and internet bills are not deductible.
• A surcharge can apply on top of the 30% once your total income crosses the relevant threshold (currently above \u20b950 lakh), at the usual slab-linked surcharge rates.

The no-loss-offset rule

This is the part that surprises the most people. VDA losses cannot be set off against VDA gains from a different coin, cannot be set off against any other type of income (salary, rent, equity gains), and cannot be carried forward to a later year. If you made \u20b910 lakh on Bitcoin and lost \u20b94 lakh on a different token in the same year, your taxable crypto income is still \u20b910 lakh, not \u20b96 lakh. The loss is simply gone for tax purposes.

Because of this, many active crypto traders in India track gains and losses per coin, not as one combined pool — the two behave very differently for tax.

The 1% TDS: Section 194S

Separately from the 30% tax, Section 194S requires 1% TDS to be deducted on the sale consideration of a VDA transaction, currently above thresholds of roughly \u20b910,000 a year for most individuals (\u20b950,000 for certain specified persons). On an Indian exchange, this is usually withheld automatically and deposited against your PAN — you don't have to do anything, but you should reconcile it in Form 26AS/AIS when filing.

TDS is not an extra tax on top of the 30%. It's an advance collection: your final 30% liability is calculated on your net gain, and the TDS already deducted is credited against it. If your TDS credit exceeds your actual liability, the excess is refundable when you file.

Airdrops, staking, mining and gifts

• Airdrops and mining rewards received without paying anything are generally taxed as income at your slab rate when received, and then the 30% rule applies again on any further gain when you eventually sell.
• Gifts of crypto from a non-relative are taxable as income if their total value exceeds \u20b950,000 in a year.
• Staking rewards are a less settled area; treat them cautiously and check with a CA on how to classify them for your specific situation.

How to report crypto in your ITR

1. Use Schedule VDA to report each transfer of a virtual digital asset.
2. Choose ITR-2 if your crypto activity is occasional and reported as capital gains, or ITR-3 if it's frequent enough to be treated as business income — this distinction genuinely changes your filing, so get a CA's view if you're unsure.
3. Reconcile Form 26AS/AIS against your exchange statements to make sure every 1% TDS deduction is accounted for.
4. File by the due date — 31 July for most individual taxpayers without an audit requirement.

From FY 2026-27, a new reporting requirement under Section 285BAA also means exchanges and other reporting entities will be sharing more transaction-level data with tax authorities, so keeping clean personal records is worth doing regardless.

Educational information only, not tax or legal advice. Tax rules change and depend on your specific facts — confirm current provisions and your own filing position with a qualified chartered accountant before filing.

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