Tax on Crypto in India: 30% Rate, 1% TDS, Loss Rules and ITR Filing
Tax on crypto in India is governed by special virtual digital asset rules. This practical guide explains when tax arises, how the 30% rate and 1% TDS work, why losses are restricted, what records to keep, and how to report transactions accurately.
Crypto taxation in India is easy to underestimate because the visible exchange statement rarely tells the full tax story. A user may buy Bitcoin with rupees, swap it for another token, move assets to a private wallet, earn staking rewards, receive an airdrop, sell part of the holding, and see 1% TDS on only some transactions. For tax filing, each event must be understood separately.
The central rule is that income from the transfer of a virtual digital asset is generally taxed at a special rate of 30% under Section 115BBH, with applicable surcharge and 4% cess. The law normally allows only the cost of acquisition as a deduction. It also restricts the set-off and carry-forward of VDA transfer losses. Section 194S separately requires 1% TDS on consideration for qualifying VDA transfers, subject to thresholds and transaction-specific responsibility.
This article follows the practical journey of an Indian investor or trader: identify the taxable event, determine the financial year, calculate each transfer, reconcile TDS, preserve evidence, estimate advance tax, choose the return form and complete Schedule VDA. It also covers staking, mining, airdrops, gifts, crypto-to-crypto swaps and transfers between your own wallets.
Quick Answer: How Tax on Crypto Works in India
In India, taxable income from transferring crypto or another virtual digital asset is generally charged at 30% under Section 115BBH, plus applicable surcharge and 4% cess. The computation ordinarily permits deduction of the asset’s cost of acquisition, but not exchange fees, internet costs, mining equipment, interest or most other expenses against that transfer income.
A separate 1% TDS under Section 194S can apply to the gross consideration paid for a VDA transfer once the relevant annual threshold is crossed. TDS is not the final tax. It is a credit that must be matched with Form 26AS, AIS and the return.
Buying and holding crypto is generally not itself a taxable transfer. Selling for rupees, swapping tokens, spending crypto or otherwise disposing of it can be taxable. Rewards, mining receipts, salary paid in crypto and gifts may create additional classification and valuation questions.
Key Takeaways
- VDA transfer income is generally taxed at 30%, plus surcharge and cess.
- Only cost of acquisition is normally deductible for Section 115BBH computation.
- A loss from a VDA transfer generally cannot be set off or carried forward.
- Section 194S TDS is normally 1% of consideration, not 1% of profit.
- Crypto-to-crypto swaps can be taxable transfers even when no rupees are received.
- ITR reporting should be transaction-wise in Schedule VDA where applicable.
- Exchange, wallet, bank, TDS and blockchain records should be reconciled before filing.
What This Page Covers
- When buying, selling, swapping, spending, gifting or receiving crypto can create tax consequences.
- How Section 115BBH calculates taxable VDA transfer income.
- How Section 194S TDS works and why it differs from final tax.
- How staking, mining, airdrops and salary paid in crypto may be classified.
- How to identify the correct financial year and assessment year.
- How to prepare transaction-wise records and reconcile AIS, Form 26AS and exchange data.
- When self-filing may be enough and when expert-assisted filing is safer.
Basis of This Crypto Tax Guide
This guide is based on the Indian income-tax framework for virtual digital assets, including Section 115BBH for transfer income and Section 194S for TDS. It also reflects the Income Tax Department’s guidance that VDA income is disclosed transaction-wise in Schedule VDA of relevant return forms.
Tax rules, return utilities, payment forms and portal screens can change. Use the Income Tax e-Filing portal and the Income Tax Department’s tax-law portal to verify the provisions and current filing process for the relevant year.
Which Crypto Activities Can Trigger Tax in India?
A taxable event is usually linked to a transfer, but some crypto receipts can be taxed when received. The first task is therefore to label every transaction correctly rather than treating all exchange movements as “trades”.
| Activity | Immediate tax question | Record to preserve |
|---|---|---|
| Buy with INR and hold | Usually no transfer income merely on purchase | Bank debit, order confirmation and cost |
| Sell crypto for INR | Transfer income under Section 115BBH may arise | Sale value, cost, fees and TDS |
| Swap token A for token B | Disposal of token A can be a taxable transfer | Fair value of both tokens and blockchain ID |
| Move between own wallets | Normally not a disposal if ownership is unchanged | Both wallet addresses and matching transaction ID |
| Stake and receive rewards | Receipt may be income; later disposal may also be taxed | Reward date, quantity and INR value |
| Mine crypto | Receipt and later transfer require separate analysis | Mining logs, wallet receipt and valuation |
| Receive an airdrop | Receipt may be taxable; later sale can create VDA income | Eligibility, receipt date and market value |
| Spend crypto on goods | Using crypto can amount to transfer | Invoice and INR value at payment time |
Transfers to a spouse, friend, exchange, bridge or smart contract need context. A wallet movement is not automatically a sale, but a bridge, wrapping transaction, liquidity-pool deposit or token redemption may change rights or assets and should be reviewed individually.
How the 30% Crypto Tax Is Calculated
Section 115BBH generally taxes income from each VDA transfer at 30%. The basic calculation is consideration minus cost of acquisition. Applicable surcharge and 4% cess are then added based on the taxpayer’s overall facts.
Why transaction-wise computation matters
Suppose one Bitcoin trade earns ₹1,00,000 and one Ether trade loses ₹60,000. A normal portfolio view may show a net profit of ₹40,000. Under the VDA loss restriction, the ₹60,000 loss may not be available to reduce the ₹1,00,000 taxable gain. Filing from a net exchange summary can therefore understate income.
What normally cannot be deducted
The law expressly limits deductions to cost of acquisition, if any. Exchange fees, advisory fees, borrowing costs, electricity, hardware depreciation, internet expenses and employee costs are not automatically deductible from Section 115BBH transfer income. Classification issues can be more complex for businesses, miners and service providers, so do not assume ordinary business-expense rules override the special provision.
How 1% TDS Under Section 194S Works
Section 194S generally requires 1% TDS on the consideration for transfer of a VDA to a resident. It applies to gross consideration, not profit. For a specified person, the annual threshold is generally ₹50,000; for others, it is generally ₹10,000.
| Point | Section 194S TDS | Final VDA tax |
|---|---|---|
| Rate | Usually 1% | Usually 30% plus surcharge and cess |
| Base | Gross consideration | Taxable income after cost of acquisition |
| Purpose | Withholding and transaction reporting | Final income-tax computation |
| Threshold | ₹50,000 or ₹10,000 depending on payer category | No equivalent profit exemption in Section 115BBH |
| Return treatment | Claim credit if reflected and eligible | Report transaction-wise in Schedule VDA |
When consideration is wholly or partly in kind, the person responsible must ensure tax is paid before releasing the consideration. Exchanges and brokers may follow CBDT-guided mechanisms, but users should still verify the TDS entry in AIS or Form 26AS. A missing TDS credit does not erase the transaction or the final tax liability.
Investing, Trading, Staking, Mining, Airdrops and Gifts
Investing and frequent trading
The 30% special rate applies to income from transfer whether the VDA is a capital asset or not. The classification as capital gains or business income can still affect the return form, accounting, disclosures and treatment of non-transfer receipts. Frequency alone is not the only factor; intention, organisation, source of funds and overall conduct matter.
Staking and yield rewards
A reward received for staking, lending or participating in a protocol can be income when received. The INR value recognised at receipt should be supported, because it may become the cost basis when the reward token is later sold. Reinvesting the reward does not make the original receipt disappear.
Mining
Mining requires careful analysis of the first taxable point and later disposal. The special VDA rule restricts deduction of expenditure from transfer income, while the mining operation may also involve a business or other-income classification. Electricity and equipment costs should not be casually netted against VDA sale proceeds without advice.
Airdrops and promotional tokens
An airdrop can be a taxable receipt based on fair market value when received, depending on facts. A later sale can trigger a second computation under Section 115BBH, with the previously recognised value potentially relevant as cost. Worthless or illiquid tokens create valuation and evidence challenges.
Gifts
Receipt of crypto without consideration can fall within gift-tax rules for property, subject to relationships, occasions and thresholds. A gift from a specified relative may be exempt for the recipient, but a later sale can still be taxable. The donor’s transfer implications and the recipient’s cost basis should be documented.
Financial Year, Assessment Year and ITR Reporting
The financial year is the period in which the transaction occurred; the assessment year is the following year in which that income is assessed and the return is filed. A sale on 31 March and a sale on 1 April belong to different financial years even if they are only one day apart.
The Income Tax Department provides a separate Schedule VDA in ITR-2 and ITR-3 for transaction-wise disclosure. ITR-2 may fit an individual without business income, while ITR-3 may be relevant where business or professional income is involved. Form selection must also account for salary, house property, foreign assets, capital gains, partnership income and residency.
For transactions on or after 1 April 2026, taxpayers and deductors should also check the transition to the Income Tax Act, 2025 and the applicable 2026 rules and forms. Portal labels and challan-cum-statement forms may differ from earlier years even where the policy outcome remains similar.
Build a Crypto Tax Record That Can Be Reconciled
A reliable filing starts with a complete transaction ledger, not a screenshot of current holdings. Export data from every exchange and wallet for the full financial year and include opening holdings acquired in earlier years if they were sold during the year.
Minimum fields in a transaction ledger
- Date and time, exchange or wallet, token, quantity and transaction type.
- INR consideration, fair market value source and cost of acquisition.
- Fees shown separately, without assuming they are deductible.
- Counter-asset details for swaps and wallet addresses for transfers.
- TDS amount, certificate or statement reference and Form 26AS/AIS status.
- Blockchain transaction hash, invoice or reward statement where relevant.
Transfers between your own wallets should be paired so the outbound and inbound entries match. Missing pairings can create false disposals. Foreign exchanges may not deduct Indian TDS or provide INR values, so the taxpayer must prepare consistent valuations and consider FEMA, PMLA and overseas-asset reporting issues where applicable.
Practical Crypto Tax Examples for Indian Users
Example 1: One profitable sale and one losing sale
Arjun sells one token for a ₹1,20,000 gain and another for a ₹70,000 loss. His exchange dashboard shows ₹50,000 net profit. For Section 115BBH, the losing transfer generally cannot reduce the profitable transfer. Arjun may therefore have taxable VDA income of ₹1,20,000 rather than ₹50,000, subject to transaction verification.
Example 2: Bitcoin exchanged for Ether
Meera bought Bitcoin for ₹2,00,000 and later swapped it for Ether worth ₹2,80,000. Even though no rupees reached her bank, disposal of Bitcoin can create ₹80,000 of VDA transfer income. The ₹2,80,000 value documented for the Ether received may become relevant to its future cost basis.
Example 3: Staking rewards followed by sale
Rahul receives staking rewards worth ₹25,000 when credited and later sells them for ₹38,000. The initial receipt may be taxable under an appropriate income head, while the later transfer may create ₹13,000 of VDA income if ₹25,000 is accepted as cost. Both dates and valuations need evidence.
Example 4: Transfer between own wallets
Sana moves tokens from an Indian exchange to her hardware wallet. Ownership does not change, so the movement is normally not a sale. She preserves the exchange withdrawal record, blockchain hash and receiving wallet address. When she later sells the tokens, those records establish continuity and cost.
Where Crypto Tax Reporting Commonly Goes Wrong
| Mistake | Why it matters | Better approach |
|---|---|---|
| Reporting only net exchange profit | VDA loss set-off is restricted | Calculate each transfer separately |
| Treating 1% TDS as final tax | Final liability can be much higher | Compute tax independently and claim credit |
| Ignoring swaps | Crypto-to-crypto disposal can be taxable | Record INR fair values for both assets |
| Marking own-wallet transfers as sales | Creates false gains and turnover | Pair outgoing and incoming wallet entries |
| Using only year-end holdings | Does not show realised transfers | Keep full-year transaction history |
| Missing advance tax | Interest may arise on delayed payment | Re-estimate liability during the year |
Crypto Tax Filing Checklist
- Export all exchange, broker and wallet records for the financial year.
- Identify buys, sells, swaps, rewards, gifts, spends and own-wallet transfers.
- Match every disposal with a supportable cost of acquisition.
- Compute each VDA transfer separately and do not automatically net losses.
- Reconcile Section 194S TDS with AIS and Form 26AS.
- Estimate advance tax and self-assessment tax where required.
- Select the ITR form based on your complete income profile.
- Complete Schedule VDA transaction-wise and preserve the working paper.
- Review foreign exchange, foreign wallet, FEMA and disclosure implications.
- Keep blockchain IDs, bank records and valuation evidence after filing.
When Expert Review Can Reduce Crypto Compliance Risk
Self-filing may be manageable when you have a small number of INR purchases and sales on one exchange, complete cost records and correctly reflected TDS. Expert-assisted filing becomes more valuable when transactions span several exchanges, private wallets, DeFi protocols, foreign platforms, staking, mining, airdrops or gifts.
WealthSure can help organise transaction data, classify receipts and transfers, reconcile TDS, prepare Schedule VDA, estimate tax and file the appropriate return. The objective is not to overstate risk; it is to make sure the return matches the evidence and the applicable year’s rules.
Summary: Tax on Crypto in India
Tax on crypto in India is built around transaction-level reporting. Income from a VDA transfer is generally taxed at 30% plus surcharge and cess, while only cost of acquisition is normally deductible. Losses are restricted, and 1% TDS is a separate credit and reporting mechanism rather than the final tax.
The most important practical steps are to identify every taxable event, record rupee values for swaps and rewards, distinguish own-wallet transfers from disposals, reconcile AIS and Form 26AS, and report relevant transactions in Schedule VDA. Accurate cost and transaction evidence is more important than a portfolio’s current market value.
Your Next Step Before Filing Crypto Income
Start by building one clean ledger that combines exchange trades, wallet movements, bank flows, rewards and TDS. Then calculate each transfer under the special VDA rules and check whether advance tax, self-assessment tax or a revised return is needed.
Simple records may support self-filing. Multiple wallets, swaps, missing costs, foreign platforms, rewards or TDS mismatches deserve a structured review before submission. Accurate classification and evidence reduce the chance of inconsistent disclosures and make future queries easier to answer.
At WealthSure, we don’t just file taxes — we simplify your financial journey and help you build long-term wealth with confidence.
Frequently Asked Questions About Tax on Crypto in India
How much tax is charged on crypto in India?
Income from the transfer of a virtual digital asset is generally taxed at 30% under Section 115BBH, plus applicable surcharge and 4% health and education cess. Only the cost of acquisition is normally deductible while computing transfer income. Transaction facts still matter because receipts such as salary in crypto, mining rewards, staking rewards, airdrops, gifts and business consideration may first require classification before a later transfer is taxed.
Is 1% TDS the final tax on crypto transactions?
No. The 1% TDS under Section 194S is a withholding and reporting mechanism, not the final crypto-tax rate. Your final liability is computed separately, generally using the 30% special rate on taxable VDA transfer income, plus surcharge and cess. TDS visible in Form 26AS or AIS can usually be claimed as credit while filing the return, subject to correct reporting and matching.
Can I set off a crypto loss against crypto profit or salary income?
Section 115BBH restricts the set-off of loss from the transfer of a virtual digital asset. A loss from one VDA transfer is generally not available to reduce income from another VDA transfer or income under another head, and it cannot ordinarily be carried forward. This is why transaction-wise computation is important instead of calculating only a net exchange-level result.
Do I pay tax merely for buying or holding crypto?
Buying crypto with rupees and continuing to hold it generally does not by itself create transfer income under Section 115BBH. Tax usually becomes relevant when there is a transfer, such as sale for rupees, exchange for another token, spending crypto, gifting in some situations, or otherwise disposing of the asset. Rewards or receipts can have separate tax consequences even before disposal.
Is swapping one cryptocurrency for another taxable in India?
A crypto-to-crypto swap can amount to a transfer of one virtual digital asset for another. The fair value of what you receive may be relevant for calculating consideration, and the cost of the asset transferred must be supported by records. TDS compliance can also be complex where consideration is wholly or partly in kind, so exchange statements and wallet evidence should be preserved.
How are staking rewards, mining income and airdrops taxed?
The treatment depends on how the asset was received and the surrounding facts. A staking reward, mining receipt or airdrop may be taxable when received under an appropriate income head, and a later sale or swap may trigger VDA transfer tax under Section 115BBH. The value recognised on receipt can affect the cost basis for the later transfer, so date, quantity, rupee value and wallet evidence should be recorded.
Which ITR form should I use for crypto income?
Indian taxpayers commonly report VDA transactions in Schedule VDA of ITR-2 or ITR-3, depending on their wider income profile and whether the activity is treated as business or professional income. ITR-1 is not designed for reporting VDA transfer income. Form selection should consider all income sources, residency, business activity, capital gains and other disclosures, not crypto alone.
How do I calculate advance tax on crypto income?
Estimate taxable VDA transfer income transaction by transaction, apply the special tax rate with surcharge and cess as relevant, include tax on other income, and reduce eligible TDS and tax credits. If the remaining tax payable crosses the applicable advance-tax threshold, instalment rules may apply. Because crypto values and volumes can change quickly, recalculate before each instalment rather than waiting until return filing.
What records should I keep for crypto tax filing?
Keep exchange trade files, order histories, wallet addresses, blockchain transaction IDs, bank statements, rupee deposit and withdrawal records, invoices, reward statements, TDS certificates, Form 26AS, AIS, screenshots and evidence of fees. Maintain a transaction-wise ledger showing date, asset, quantity, purpose, consideration, cost and tax deducted. Records should cover transfers between your own wallets so they are not mistaken for disposals.
When should I use expert-assisted crypto tax filing?
Expert review is useful when you used multiple exchanges or wallets, made crypto-to-crypto swaps, received staking or mining rewards, traded through foreign platforms, have missing cost records, see AIS or TDS mismatches, or need to choose between ITR-2 and ITR-3. Assistance can also help when advance tax, revised returns, notices or business classification are involved.