Key takeaways
- Gains from Virtual Digital Assets (VDA) — crypto, NFTs — are taxed at a flat 30% in India under Section 115BBH, regardless of income slab.
- 1% TDS is deducted by the exchange on every crypto sell trade above ₹10,000 (₹50,000/year for specified persons), under Section 194S.
- Crypto losses cannot be set off against any other income or carried forward — each loss-making trade is genuinely lost.
- Only acquisition cost is deductible. No deduction for trading fees, infrastructure, or any expense beyond the purchase price.
- Airdrops, mining rewards, and staking income are taxed twice: first at FMV when received (as income at slab), then at 30% on any further appreciation when sold.
The basic framework
India's crypto tax regime, introduced in Budget 2022 and unchanged through Budget 2026, is intentionally harsh. Crypto and NFTs are classified as "Virtual Digital Assets" (VDA) under Section 2(47A) of the Income Tax Act. Section 115BBH governs their taxation — 30% flat tax plus applicable surcharge and 4% cess.
The intent of this framework is clear: India's government tolerates crypto trading legally but treats it as speculative — explicitly less favourable than equity, mutual funds, debt, or even lottery (which has loss-carry-forward provisions crypto lacks).
The 30% tax on gains
Every gain from selling, swapping, or transferring a VDA is taxed at 30% (plus surcharge based on income, plus 4% cess). The taxable amount is sale price minus cost of acquisition — nothing else.
What you cannot deduct
- Trading fees, gas fees, network fees
- Infrastructure cost (computer, internet, electricity for mining)
- Subscription costs of analytics platforms
- Loan interest if you borrowed to buy crypto
- Any other expense — only acquisition cost is allowed
Worked example 1 — a single trade
You buy 1 BTC at ₹40 lakh on 1 May 2026. You pay ₹40,000 in trading fees on the buy side. You sell at ₹55 lakh on 1 December 2026. You pay ₹55,000 in fees on the sell side.
- Cost of acquisition: ₹40 lakh (fees ignored)
- Sale value: ₹55 lakh (fees ignored)
- Taxable gain: ₹15 lakh
- Tax at 30% = ₹4,50,000
- + 4% cess = ₹18,000
- + Surcharge if your total income is above ₹50 lakh (10% to 37% scale)
- Total tax: minimum ₹4,68,000 on a ₹15 lakh gain — and you paid ₹95,000 in fees that you cannot deduct.
The 1% TDS — Section 194S
Effective 1 July 2022, every Indian crypto exchange must deduct 1% TDS on the consideration paid to the seller in any VDA transaction, on each individual sell trade.
The thresholds
- For "specified persons" (individuals/HUF with no business income from crypto, with crypto turnover ≤ ₹10 crore): TDS triggers above ₹50,000 of annual transaction value.
- For everyone else (frequent traders, businesses, exchanges): TDS triggers on every transaction above ₹10,000.
The TDS is on the GROSS sale value, not on the gain. So even loss-making sales attract TDS.
Worked example 2 — multiple trades
You execute 50 trades over FY 2026-27 on WazirX. Total sell value: ₹15 lakh. Total realised gains: ₹2 lakh.
- 1% TDS on each trade above ₹10,000 → roughly ₹15,000 deducted at source across the year
- Tax on ₹2 lakh gain at 30% + 4% cess = ₹62,400
- TDS already paid: ₹15,000
- Additional tax to pay when filing: ₹47,400
If your trade-level gains are smaller than the TDS deducted, you can claim refund — but only when filing your ITR for that financial year.
The no-loss-set-off rule
This is where India's crypto tax differs from equity and mutual fund treatment. Under Section 115BBH(2):
- Losses from one VDA cannot be set off against gains in another VDA.
- Losses from VDAs cannot be set off against any other income (salary, business, rental, capital gains from equity, etc.).
- Losses cannot be carried forward to future years.
Worked example 3 — losses are gone
You buy ETH at ₹3 lakh, sell at ₹2 lakh — ₹1 lakh loss.
You buy SOL at ₹2 lakh, sell at ₹3.5 lakh — ₹1.5 lakh gain.
Tax computation:
- Net economic gain: ₹50,000
- Taxable gain (under Section 115BBH): ₹1.5 lakh — the ETH loss does not offset.
- Tax at 30% = ₹45,000
- + 4% cess = ₹1,800
- Effective tax rate on your ₹50,000 net gain: 93.6%
This is mathematically why frequent crypto trading is rarely viable in India. The asymmetric treatment of gains and losses crushes risk-adjusted returns.
Special situations
Airdrops, staking, mining rewards
Tokens received as airdrops, staking rewards, mining rewards, or any "earned" crypto are taxed at fair market value (FMV) on the day of receipt — at your normal slab rate (not at 30%). The FMV becomes your cost of acquisition for those tokens.
If you later sell those tokens at a higher price, the further gain is taxed at 30% under Section 115BBH.
Crypto-to-crypto swaps
Each swap is a sale of the source asset followed by a purchase of the target asset. So a BTC-to-ETH swap creates a taxable gain or loss on the BTC leg — even though no INR moved. Most exchanges automatically deduct 1% TDS on these.
NFTs
NFTs that derive value from crypto are VDAs — same 30% tax regime applies. The Income Tax Department issued specific guidance in 2022 confirming this.
Foreign exchange holdings (Binance, Coinbase, etc.)
Indian residents must declare foreign exchange-held crypto under Schedule FA in their ITR — separately from the gain/loss computation. Non-disclosure is treated harshly under the Black Money Act with penalties up to 200% of the undisclosed amount.
Gifts of crypto
Crypto received as a gift above ₹50,000 (cumulative per FY) is taxed in the recipient's hands at slab rate — same as cash gifts. Subsequent sale gains are taxed at 30%, with the gift's FMV at receipt as the cost of acquisition.
Filing your crypto tax — the practical workflow
- Download annual statements from every exchange you used. WazirX, CoinDCX, Binance, Coinbase all provide PDF or Excel reports.
- Tally each individual trade — sale price, cost, gain/loss. Aggregation alone won't satisfy the section requirements.
- Cross-check 1% TDS against Form 26AS — exchanges report under Section 194S using your PAN.
- File under Schedule VDA in your ITR-2 or ITR-3. ITR-1 (Sahaj) does not support VDA reporting.
- Disclose foreign exchange holdings in Schedule FA if you used non-Indian exchanges.
For high-volume traders (50+ trades/year), specialised platforms like KoinX, ClearTax Crypto, and TaxNodes import exchange data and produce ITR-ready VDA schedules.
Strategy implications for retail crypto holders
Buy-and-hold beats frequent trading
Because losses don't set off and fees are not deductible, the math favours long-term holding. A frequent trader with 60% win rate and 1.5x average win:loss ratio is mathematically guaranteed to underperform a buy-and-hold investor over 3+ year horizons.
Avoid swap-heavy strategies
Each swap is a taxable event. Staking that auto-compounds via swaps creates tax liability with no INR realisation.
Realise gains in low-income years
The 30% rate is FLAT regardless of income — but surcharge varies with income. If you realise gains in a year your total income is below ₹50 lakh, you avoid surcharge entirely (saving 10–37% on your tax).
Indian crypto tax is the harshest among major economies. If you are trading crypto for income, run your strategy through this filter before assuming traditional equity-like returns are achievable on a post-tax basis.
Crypto regulations remain in flux globally. This article reflects the law as of Q2 2026 (Budget 2026 onwards). Always check the latest CBDT circulars or consult a SEBI-registered tax advisor before filing.
Frequently Asked Questions
What is the crypto tax rate in India for FY 2026-27?
30% flat plus 4% cess and applicable surcharge under Section 115BBH. The rate does not depend on your income slab — even a salaried person earning ₹3 lakh pays 30% on crypto gains. Plus 1% TDS is deducted by Indian exchanges on every sell trade.
Can I set off crypto losses against equity gains?
No. Section 115BBH explicitly prevents VDA losses from being set off against any other income — including equity capital gains, salary, business, or rental. Crypto losses are gone permanently in the year they occur.
Is the 1% TDS refundable if I made losses?
Yes, but only after you file your ITR for the year. The TDS becomes a credit against your final tax liability. If your liability is lower than the TDS deducted, the difference is refunded. Refunds typically take 4–8 weeks after ITR processing.
Do I need to pay tax on crypto held but not sold?
No. Crypto tax is on realised gains only. Holding ₹10 crore worth of BTC that has appreciated 5x triggers no tax until you sell. The 1% TDS also applies only on sale, not on holding.
What about crypto gifts to family?
Gifts to specified relatives (spouse, parents, siblings, children) are tax-free for the recipient — same as cash gifts. But subsequent sale of the gifted crypto by the recipient triggers the 30% tax. Cost of acquisition is the donor's original cost (clubbing rules apply for spouse).