Day 4: Crypto tax in India: 30%, 1% TDS
India taxes crypto differently from shares. Today: the flat 30%, why losses do not count, and what the 1% TDS is. About 5 minutes.
1. Virtual digital asset (VDA)
"Virtual digital asset" is the legal term Indian tax law uses for crypto assets. The Finance Act 2022 inserted the definition into the Income-tax Act, 1961 as section 2(47A), and the Income-tax Act, 2025 carries it forward. It broadly covers any information, code, number or token generated through cryptographic or similar means that provides a digital representation of value and can be transferred, stored or traded electronically. Non-fungible tokens are included, and the government can notify other assets to include or exclude. Indian rupees and foreign currency are excluded. CBDT Notification 74/2022 also excludes gift cards and vouchers, reward or loyalty points, and website or app subscriptions, and Notification 75/2022 excludes NFTs whose transfer legally transfers ownership of an underlying tangible asset. Bitcoin, ether, stablecoins, most other tokens and most NFTs are VDAs. The VDA label determines the tax treatment: a flat 30% on income from transfers plus cess, deduction only for cost of acquisition, no set-off of losses, and 1% TDS on transfers above thresholds.
In India: This is an India-specific term. Gains are reported in Schedule VDA of your income-tax return.
More on Virtual digital asset (VDA) →2. Section 115BBH (30% crypto tax)
Section 115BBH of India's Income-tax Act, 1961 set the special tax regime for income from the transfer of virtual digital assets (VDAs), including cryptocurrencies and NFTs. It was introduced by the Finance Act, 2022 and applied from 1 April 2022 (assessment year 2023-24 onwards). Under it, gains from transferring a VDA are taxed at a flat 30%, plus applicable surcharge and 4% health and education cess, whatever your income slab and however long you held the asset. The only deduction allowed is the cost of acquisition; expenses such as exchange fees, internet costs or interest cannot be deducted. Losses from VDA transfers cannot be set off against any other income, including gains from other VDAs, and cannot be carried forward to later years. This makes crypto one of the most heavily taxed asset classes in India. Gains are reported transaction by transaction in Schedule VDA of the income tax return.
In India: From 1 April 2026 the Income-tax Act, 1961 was replaced by the Income-tax Act, 2025, which carries the VDA rules over under new section numbers; the old numbers still apply to transactions up to 31 March 2026 and remain the names most people search for. Under the 2025 Act, the VDA tax charge sits in section 194 alongside other special-rate incomes, and the VDA definition moved from section 2(47A) to 2(111).
More on Section 115BBH (30% crypto tax) →3. TDS on crypto (1%)
TDS, or tax deducted at source, on crypto is India's rule that the buyer of a virtual digital asset, or the exchange in practice, must deduct 1% of the sale consideration and pay it to the government on the seller's behalf. It was introduced as Section 194S of the Income-tax Act, 1961 from 1 July 2022 and continues under Section 393 of the Income-tax Act, 2025. TDS applies to swaps of one VDA for another as well as to rupee sales. It does not apply if aggregate consideration in a financial year stays within ₹50,000 for a "specified person", broadly individuals and HUFs without business income or under the audit turnover limits, or within ₹10,000 for others. The rate rises to 20% if the seller has not furnished a PAN. TDS is not an extra tax. It shows up in your Form 26AS and AIS, and you claim it as a credit against your final liability.
In India: Use our calculator to see how TDS offsets the 30% tax plus cess on a sale.
More on TDS on crypto (1%) →4. Crypto losses and set-off in India
Under India's VDA tax rules, losses from crypto cannot reduce your tax bill in the way stock market losses can. A loss from transferring a virtual digital asset cannot be set off against any other income, such as salary, business income or capital gains from shares, and cannot be carried forward to future years. The law goes further: a loss on one VDA cannot be set off against a gain on another VDA either, and Schedule VDA requires losses to be entered as nil. So if you made ₹1 lakh profit on bitcoin and lost ₹1 lakh on an altcoin in the same year, you still pay 30% tax on the ₹1 lakh bitcoin gain. This asymmetry makes active trading of many tokens costly: winning trades are taxed while losing trades bring no relief. Tax-loss harvesting strategies used in other countries do not work for crypto in India. Investors should factor this into position sizes and keep careful records of every transaction.
In India: From 1 April 2026 the Income-tax Act, 1961 was replaced by the Income-tax Act, 2025, which carries the VDA rules over under new section numbers; the old numbers still apply to transactions up to 31 March 2026 and remain the names most people search for.
More on Crypto losses and set-off in India →5. Schedule VDA (ITR)
Schedule VDA is the section of the Indian income tax return where you report income from transferring virtual digital assets such as crypto and NFTs. It was introduced in the ITR forms for assessment year 2023-24, the first year of the 30% VDA tax. Each transfer must be reported separately, with the date of acquisition, date of transfer, cost of acquisition, sale consideration and resulting gain, and you choose whether it is taxed as capital gains or business income. Losses are entered as nil and cannot reduce other gains. The schedule is available in ITR-2 (for individuals without business income) and ITR-3 (for those with business or professional income); ITR-1 and ITR-4 cannot be used if you have VDA income. Exchanges usually provide tax reports with this data. Check that the TDS shown in your Form 26AS and AIS matches your records, and remember that crypto-to-crypto swaps are transfers that must be reported too.
In India: Income for 2025-26 is filed in 2026 under the old 1961 Act and its forms. From tax year 2026-27, returns are filed under the Income-tax Act, 2025, but the obligation to report VDA transfers continues.
More on Schedule VDA (ITR) →
Do this today
Run the tax calculator →Enter a buy and sell price to see the 30% tax, cess and TDS credit.
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General information, not financial advice.