Crypto Tax in India: 30% Tax, 1% TDS, Loss Rules and ITR Filing
Crypto tax in India applies to transfers and several forms of virtual digital asset income. This guide explains the special tax rate, TDS, transaction-wise loss restrictions, valuation, record keeping and Schedule VDA reporting for Indian users.
Crypto tax is not calculated merely by checking whether your portfolio is up or down. Indian tax rules focus on specific events: a sale for rupees, a swap into another token, spending crypto, transferring it for consideration, receiving tokens as rewards, or receiving a virtual digital asset as a gift or payment. Each event can have a different tax and record-keeping consequence.
The most widely known rule is the special 30% tax on income from transfer of virtual digital assets, plus applicable surcharge and 4% cess. Equally important are the restrictions: only the permitted cost of acquisition is generally deductible, a loss from one VDA cannot be set off against another VDA gain or other income, and the loss cannot be carried forward. A separate 1% TDS mechanism may apply to the transfer consideration, but that TDS is not the final tax.
This article follows the practical journey of an Indian investor or trader: identify the taxable event, determine the rupee value and cost, calculate transaction-wise income, reconcile TDS, choose the correct return, complete Schedule VDA, pay any balance tax and preserve evidence. Where a receipt such as mining, staking, salary, airdrop or business consideration is involved, the receipt and later transfer must be analysed separately.
Quick Answer: How Crypto Tax Works in India
When you transfer a crypto asset or another qualifying virtual digital asset, the resulting income is generally taxed at 30% plus applicable surcharge and 4% cess. For this special calculation, the law ordinarily allows only the cost of acquisition as a deduction. Losses on VDA transfers cannot generally be adjusted against another crypto gain, salary, business income, capital gains or any other income, and cannot be carried forward.
A 1% TDS may also be deducted from the transfer consideration under the applicable VDA withholding rules. This amount is a tax credit, not a substitute for calculating your final liability. You should match the credit with AIS, Form 26AS, exchange statements and TDS records before filing.
Report eligible transactions transaction-wise in Schedule VDA in the applicable ITR. ITR-2 may be relevant where there is no business or professional income; ITR-3 may be needed when the taxpayer has business or professional income. The final choice depends on the entire return profile.
Key Takeaways
- Crypto-to-INR sales, crypto swaps and spending crypto can each amount to a transfer.
- The 30% rate applies to taxable VDA transfer income, with surcharge and cess added where applicable.
- Only the permitted cost of acquisition is generally deductible in the special transfer calculation.
- A loss on one token cannot normally reduce a gain on another token and cannot be carried forward.
- The 1% TDS is calculated on consideration and is claimed as credit; it is not the final tax.
- Staking, mining, salary receipts, airdrops and gifts may create a tax event on receipt and another on later transfer.
- Accurate filing depends on transaction-level exchange, wallet, bank, valuation and TDS records.
What This Page Covers
- Which sales, swaps, transfers, rewards and receipts may be taxable.
- How the 30% special rate, surcharge and cess work.
- How 1% TDS differs from the final tax liability.
- Why crypto losses cannot normally offset other gains or income.
- How to value staking, mining, airdrop, salary and gift receipts.
- How to reconcile exchanges, wallets, AIS, Form 26AS and bank records.
- How to select the return and prepare Schedule VDA correctly.
Basis of This Guide and Trusted Sources
This guide is based on the Indian income-tax framework for virtual digital assets, official return-filing guidance, practical exchange and wallet reconciliation workflows, and the compliance questions commonly faced by investors, traders and taxpayers.
For filing and portal actions, use the Income Tax e-Filing portal. The department's ITR guidance confirms that Schedule VDA is used for transaction-wise reporting in the applicable return and that VDA gains are subject to the special rate. For statutory interpretation, refer to the Income Tax Department's tax-law resources and relevant CBDT circulars. Rules, form labels and TDS procedures can change, particularly during the transition to the new income-tax framework from 1 April 2026, so verify the form and workflow for the relevant financial year.
Which Crypto Activities Can Trigger Tax in India?
A tax event can arise whenever there is a transfer of a qualifying virtual digital asset or when crypto is received as income or a taxable gift. The exact result depends on what happened, who received the asset, the relationship between parties and whether the activity forms part of a business or profession.
| Crypto activity | Possible tax point | Records to preserve |
|---|---|---|
| Sell crypto for INR | Transfer income on sale | Trade confirmation, sale value, cost, fees, bank receipt |
| Swap BTC for ETH | Transfer of BTC; acquisition of ETH | Both token quantities, INR values and timestamps |
| Use crypto to buy goods | Transfer when crypto is spent | Invoice, wallet transfer, INR value and original cost |
| Move crypto between own wallets | Normally not a sale by itself, but must be identified correctly | Source and destination wallet proof, transaction hash |
| Receive staking reward | Possible income on receipt; later transfer may create VDA gain | Reward statement, date, quantity, INR valuation |
| Receive crypto as salary or fee | Income based on nature of employment or profession; later transfer separately | Contract, invoice, payslip, wallet receipt and valuation |
| Receive a gift | Gift taxation may apply depending on value, relationship and exception | Donor details, relationship proof, gift deed and valuation |
A transfer should not be confused with an internal wallet movement. When tokens move from your exchange account to your personal wallet, or between wallets you control, there may be no disposal if beneficial ownership has not changed. But an exchange export may label the movement as a withdrawal. Reconciliation must therefore distinguish a transfer to yourself from a sale, swap, payment or gift.
Buying and holding crypto
Buying with rupees generally creates a cost record rather than immediate transfer income for the buyer. The key task is to preserve the INR amount, token quantity, purchase date, platform charges and payment trail. Holding an asset without selling or otherwise transferring it does not by itself create VDA transfer income, although a taxable receipt can still arise if the token was earned or gifted.
Crypto-to-crypto swaps
A swap is not tax-free merely because no rupees enter your bank account. Giving up one token in return for another can constitute a transfer. You need an INR value for the token disposed of and a defensible acquisition value for the token received. If the platform records only token quantities, use a consistent and supportable valuation source and preserve screenshots or API data.
How the 30% Crypto Tax Is Calculated
The special tax is generally applied to income from each taxable VDA transfer after deducting the permitted cost of acquisition. Applicable surcharge and 4% cess are added to the income-tax amount. The special rate does not mean 30% of the sale proceeds in every case; it applies to the taxable income computed under the VDA rule.
Basic transfer computation: Sale or transfer consideration minus permitted cost of acquisition equals taxable VDA income. The law restricts other deductions, so costs that might normally be claimed in a business or capital-gain computation may not be allowed in this special calculation.
| Item | Illustrative amount |
|---|---|
| Sale consideration | ₹3,00,000 |
| Permitted cost of acquisition | ₹2,20,000 |
| Taxable VDA income | ₹80,000 |
| Tax at 30% | ₹24,000 |
| Health and education cess at 4% on tax | ₹960 |
| Illustrative tax before surcharge and credits | ₹24,960 |
This illustration excludes surcharge, interest, other income and available TDS credit. Your final computation must be integrated with the total return.
What counts as cost of acquisition?
For a straightforward purchase, the original INR purchase price is the starting point. More difficult questions arise with gifts, airdrops, mining, staking rewards, salary receipts and crypto acquired through a swap. The amount taxed or recognised on receipt, donor cost rules, valuation evidence and the specific legal character of the receipt can affect the later cost. Do not use a zero cost automatically without reviewing the facts.
Financial year and assessment year
Crypto transactions are reported for the financial year in which the taxable event occurred. The corresponding assessment year is the following year in which the income is assessed and the return is filed. For example, a transfer on 20 January 2026 falls in financial year 2025-26 and is ordinarily reported in assessment year 2026-27. Keep timestamps in Indian Standard Time or document how UTC exchange timestamps were converted.
How 1% TDS on Crypto Transfers Works
The VDA TDS mechanism generally requires tax to be deducted at 1% of the transfer consideration when the statutory conditions and threshold are met. The obligation can be handled by an exchange in many platform transactions, but direct peer-to-peer, in-kind and off-platform transfers require closer attention.
TDS is based on consideration, not profit. A seller can therefore face TDS even on a loss-making transfer. This often creates confusion because the exchange deduction appears in the ledger while the final tax is computed separately on taxable income.
| Question | Practical answer |
|---|---|
| Is 1% TDS the final tax? | No. Claim it as eligible credit and compute final tax separately. |
| Does TDS apply to a loss-making sale? | It can, because withholding is linked to consideration, not profit. |
| Who deducts it? | Often the exchange in exchange-facilitated trades; responsibility can differ in direct transactions. |
| What about a crypto swap? | Special procedures may be needed where consideration is in kind or another VDA. |
| Where should credit appear? | Check exchange records, AIS, Form 26AS and the relevant TDS certificate or statement. |
For events up to 31 March 2026, legacy references such as section 194S and Form 26QE may apply. For relevant events from 1 April 2026, the official portal describes a transition to the new Income-tax framework and common Form 141 for specified challan-cum-statement transactions, including VDA transfers by applicable individuals or HUFs. Use the form and section references applicable to the transaction date.
Why TDS credits go missing
Common causes include an incorrect PAN, delay in filing the TDS statement, wrong transaction date, platform-level aggregation, a deduction recorded under another account, or an off-platform buyer who did not complete compliance. Do not claim unsupported credit merely because the exchange ledger shows a deduction. Match the amount with official tax records and follow up before filing or use a revised return where legally available.
Why Crypto Losses and Expenses Need Special Treatment
The VDA regime is unusually restrictive. A loss from one VDA transfer cannot ordinarily be set off against income from another VDA transfer or any other source, and it cannot be carried forward. This means the overall portfolio result is not the same as taxable income.
Suppose you make a ₹1,00,000 gain on Token A and a ₹90,000 loss on Token B. Under ordinary portfolio thinking, your net gain is ₹10,000. Under the special VDA rule, the ₹90,000 loss cannot normally reduce the ₹1,00,000 taxable gain. The result can feel harsh, but filing should follow transaction-wise statutory computation rather than a net exchange dashboard figure.
Expenses that users often try to deduct
Exchange commissions, gas fees, internet expense, research subscriptions, hardware costs, interest, advisory fees and depreciation are frequently listed in trading reports. Their tax treatment is not automatically the same as the treatment of the acquisition price. For the special transfer computation, the law generally restricts deduction to the cost of acquisition. Where a separate receipt is treated as business or professional income, some expenses may require analysis under that income head, but this does not override the restriction on VDA transfer income.
Do not combine unmatched reports
An exchange P&L statement may use FIFO, average cost or another methodology. A tax utility may use a different approach. Wallet software may value tokens using global prices that do not match the Indian exchange price or transaction timestamp. Choose a consistent, supportable method aligned to the filing requirements, then retain the raw records and reconciliation notes.
Staking, Mining, Airdrops, Salary and Gifts
Not every crypto receipt begins as transfer income. The first tax question is why the asset was received. A second tax event may arise when that asset is later sold, swapped or spent.
Staking and yield rewards
Rewards can be taxable when received, depending on the arrangement and taxpayer facts. Record the date, quantity, wallet, INR fair value and nature of the reward. When the token is later transferred, calculate the VDA transfer result using the appropriate cost basis supported by the original receipt treatment.
Mining
Mining may involve business activity, equipment, electricity and recurring operations. The tax treatment of the mined token on receipt and the cost for later transfer can be complex, particularly because the special VDA transfer rule restricts deductions. A miner should maintain equipment invoices, electricity records, pool statements, wallet receipts and valuation evidence rather than relying only on a year-end token balance.
Airdrops and promotional tokens
An airdrop can have value when received, even if the user did not pay cash. Some tokens are illiquid or cannot be sold, making valuation difficult. Record the eligibility event, receipt date, restrictions, market used for valuation and evidence of actual tradability. A later sale can create a separate VDA transfer result.
Crypto received as salary, freelance fee or business consideration
The INR value of crypto received for employment, professional or business services can be income under the relevant head. GST and invoicing questions may also arise for businesses and professionals. Later disposal of the token is a distinct event. Keep the employment contract or invoice, the wallet transaction hash, INR valuation and the related bank or accounting entry.
Gifts
Receiving a VDA without consideration or for inadequate consideration may fall within gift-tax provisions, subject to monetary thresholds and exceptions such as specified relatives, marriage, inheritance and other statutory situations. The donor's acquisition details and relationship proof can affect both the receipt and later sale. Use a written gift record and do not rely only on a wallet transfer.
How to Reconcile Exchanges, Wallets, AIS and TDS Records
A reliable crypto tax file starts with a complete transaction universe. Download data from every exchange, wallet and platform used during the year, including closed accounts. Do not exclude deposits and withdrawals: they are needed to identify internal transfers and prevent double-counting.
- Collect raw exports. Obtain trade history, orders, deposits, withdrawals, fees, rewards and TDS statements.
- Standardise timestamps and currency. Convert UTC where necessary and record INR values consistently.
- Link internal transfers. Match transaction hashes, quantities and timing between source and destination wallets.
- Classify each row. Purchase, sale, swap, fee, reward, gift, transfer, salary, mining or other receipt.
- Establish cost. Trace the original purchase or the value recognised when received.
- Compute transfer income transaction-wise. Do not net disallowed losses.
- Match tax credits. Compare exchange deductions with AIS, Form 26AS and available certificates.
- Review unexplained balances. Missing purchases, negative holdings and duplicate disposals signal incomplete data.
Where foreign exchanges or self-custody wallets are used, the official tax system may not receive a complete transaction feed. The obligation to report accurately remains with the taxpayer. Foreign asset or income disclosures may also require review depending on residential status, situs, custody arrangement and the applicable form instructions.
Practical Crypto Tax Examples
Example 1: Profitable sale with TDS
Riya buys crypto for ₹2,00,000 and sells it for ₹2,80,000. Her transaction-wise VDA income is ₹80,000 before considering the limited permitted adjustments. The 30% tax is ₹24,000, and cess increases it to ₹24,960 before surcharge, interest and other return items. If 1% TDS of ₹2,800 was deducted and appears as eligible credit, it can reduce the balance payable, but it does not change the ₹80,000 taxable gain.
Example 2: One gain and one larger loss
Arjun earns ₹1,20,000 on one token and loses ₹1,50,000 on another. His exchange dashboard shows an overall loss of ₹30,000. For VDA tax, the ₹1,50,000 loss cannot ordinarily be set off against the ₹1,20,000 gain, so tax may still arise on the profitable transfer. The loss cannot be carried forward.
Example 3: Swap followed by sale
Meera buys Token A for ₹75,000. She later swaps it for Token B when Token A is worth ₹1,10,000. The swap can create a ₹35,000 transfer gain on Token A. Token B receives a supportable acquisition value based on the swap. When she later sells Token B, that sale is another transfer and requires a separate calculation.
Example 4: Staking reward
Kabir receives staking rewards worth ₹25,000 on the receipt date. Depending on the facts, the ₹25,000 may be taxable under the appropriate income head. If he later sells the rewards for ₹32,000, the later transfer can create an additional VDA gain, with the cost basis supported by the original recognition and records.
Crypto Tax Filing Checklist for Indian Taxpayers
Before filing, verify that every disposal has an acquisition source, internal transfers are matched, TDS credit is supported, transaction dates fall in the correct financial year, and the return form reflects all income sources. After filing, e-verify the return and retain the computation, acknowledgements and source records.
Where Crypto Tax Reporting Commonly Goes Wrong
- Using net portfolio profit: disallowed VDA losses are incorrectly offset against gains.
- Ignoring swaps: crypto-to-crypto exchanges are treated as non-taxable.
- Confusing TDS with final tax: users assume the 1% deduction settles liability.
- Missing rewards: staking, airdrop or referral receipts are omitted.
- Double-counting wallet transfers: withdrawals and deposits between own wallets are treated as sales and purchases.
- Unsupported cost basis: the purchase trail is missing or reconstructed without evidence.
- Wrong form selection: ITR-2 is used despite business income, or ITR-3 is chosen without analysing the activity.
- Claiming unmatched TDS: exchange ledger deductions are claimed even though official credit is absent.
- Ignoring advance tax: substantial liability is left until filing, leading to possible interest.
When an Expert Review May Be Worthwhile
Self-filing may be manageable when there are only a few documented exchange purchases and sales. Expert review becomes valuable when transactions span multiple exchanges and self-custody wallets, records are missing, tokens were received through staking or mining, crypto was paid as salary or business consideration, foreign platforms were used, TDS is mismatched, or the return involves business income, foreign assets, notices or past-year corrections.
WealthSure can help prepare a reconciled transaction file, identify internal transfers, reconstruct acquisition cost, review the tax character of receipts, estimate advance tax, match TDS credits, prepare Schedule VDA and complete assisted ITR filing. The objective is not to eliminate legitimate tax, but to report the correct amount with a defensible record trail.
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Summary: Crypto Tax in India
Crypto tax in India is built around transaction-level reporting. Income from transfer of a VDA is generally taxed at 30% plus applicable surcharge and cess, with only the permitted acquisition cost deductible. VDA losses cannot normally offset other gains or income and cannot be carried forward. A separate 1% TDS may apply to consideration, but it is only a credit toward final liability.
Sales, swaps, spending, rewards, salary receipts, mining, airdrops and gifts require different classification and records. Complete filing depends on reconciling exchanges, wallets, bank statements, INR valuations, AIS, Form 26AS and TDS data, then reporting the transactions in Schedule VDA in the correct ITR. When data is incomplete or the activity is complex, professional reconciliation can materially reduce filing errors.
Frequently Asked Questions About Crypto Tax in India
What is the crypto tax rate in India?
Income from transfer of a virtual digital asset is generally taxed at a special rate of 30%, plus applicable surcharge and 4% health and education cess. The effective amount can therefore be higher than 30%. The tax is calculated on taxable gains after deducting only the permitted cost of acquisition. The result can differ for rewards, salary receipts, business receipts, mining, staking, airdrops or gifts because the receipt and later transfer may create separate tax events.
Is 1% TDS the final tax on crypto transactions?
No. The 1% TDS is a withholding and reporting mechanism, not the final tax liability. It is generally deducted from the transfer consideration when the applicable threshold and conditions are met. The seller can claim eligible TDS credit in the income-tax return, but must separately compute the taxable VDA gain and pay any balance tax through advance tax or self-assessment tax.
Can crypto losses be set off against crypto gains in India?
The special VDA rules do not permit a loss from transfer of one virtual digital asset to be set off against income from another VDA or against any other income. Such loss also cannot be carried forward. This is why transaction-wise computation is important: profitable disposals may remain taxable even when the overall portfolio or another token shows a loss.
Which expenses can be deducted while calculating crypto tax?
For income from transfer of a VDA, the law generally permits deduction only for the cost of acquisition. Other expenses such as exchange fees, internet costs, advisory fees, mining equipment depreciation, wallet costs or financing charges are not ordinarily deductible under the special transfer-income computation. The treatment of receipts from mining, staking or business activity can require a separate analysis before the later transfer is calculated.
Does swapping one cryptocurrency for another create tax?
A crypto-to-crypto swap can be treated as a transfer because one VDA is exchanged for another. The fair value of what is received or transferred must be identified in Indian rupees, and the gain on the asset given up should be computed transaction-wise. TDS compliance may also arise, especially where consideration is wholly or partly in kind.
Is tax payable when I only hold crypto and do not sell it?
Mere holding, without a transfer or a taxable receipt, does not generally create transfer income under the VDA provisions. However, receiving crypto through salary, business consideration, staking, mining, airdrops or gifts may create a taxable event even before sale. Foreign exchange or wallet holdings may also trigger disclosure questions depending on the facts and the applicable return form.
How are staking rewards, mining income and airdrops taxed?
Their treatment depends on how the token was received and the taxpayer's facts. A reward may be taxable on receipt as business income, professional income, salary, or income from other sources at its fair market value. A later sale can create a separate VDA transfer gain. Because the acquisition cost and valuation trail are critical, users should preserve reward statements, wallet records and the INR value used on the receipt date.
Which ITR form should be used for crypto income?
The correct form depends on the taxpayer's complete income profile. ITR-2 may be appropriate for an individual or HUF with VDA transfer income but no business or professional income, while ITR-3 may be relevant where the activity is reported as business or professional income. Schedule VDA is used for transaction-wise disclosure in the applicable return. Form selection should be based on all income, not crypto alone.
What records should I keep for crypto tax filing?
Keep exchange trade reports, wallet histories, deposit and withdrawal records, bank statements, contract notes or confirmations, INR valuation evidence, invoices, reward statements, TDS certificates or ledger entries, AIS and Form 26AS data, and proof of the original purchase cost. Records should allow you to distinguish purchases, sales, swaps, internal wallet transfers, gifts, fees and receipts.
Can WealthSure help reconcile multiple exchanges and wallets?
Yes. WealthSure can assist with transaction classification, cost-basis reconstruction, exchange and wallet reconciliation, Schedule VDA preparation, TDS-credit matching, advance-tax estimation and assisted ITR filing. Expert review is particularly useful where records are missing, transactions span several platforms, crypto was received in kind, or AIS and exchange data do not match.
Your Next Step Before Filing
Download every exchange and wallet record before the filing deadline, classify each transaction and check whether all TDS credits appear in official records. Do not rely on a single P&L number or assume that a portfolio loss removes tax on profitable transfers. Review the form and TDS procedure applicable to the transaction year, especially for transactions around the 1 April 2026 transition.
Once the computation is complete, pay any advance or self-assessment tax due, file the applicable return with Schedule VDA, e-verify it and retain the reconciliation file. A clean evidence trail is the best protection against future mismatch questions.