Swapping bitcoin for ether, or ether for a smaller token, feels like moving money between pockets. Indian tax law doesn’t see it that way. Every coin-for-coin swap counts as selling the coin you give up, and if that coin gained in value, you owe tax on the gain that day, even though not a single rupee reached your bank account.
The short answer: yes, a crypto-to-crypto swap is taxable in India, at 30% plus 4% cess on the gain, with 1% TDS on the swap’s value. And because crypto losses can’t offset crypto gains, a chain of swaps can be taxed far more heavily than the profit you actually made.
Why a swap counts as a sale
The 1961 Act taxed income “from the transfer” of a virtual digital asset under section 115BBH, which became section 194 of the Income-tax Act, 2025 from 1 April 2026. Giving up one coin in return for another is a transfer, and the value you receive is the coin you get back.
So when you swap BTC for ETH, you are treated as having sold the BTC for the rupee value of the ETH received. That ETH then has a cost equal to that same value, which is what you subtract when you later sell or swap it. A CA’s client FAQ at Patron Accounting and the Virtual Auditor guide to the 2025 Act both describe it this way.
The law allows no deduction other than cost of acquisition, so exchange fees and gas don’t reduce the gain, and no crypto loss can be set off or carried forward.
Our example: three moves, one real profit
Take ₹1,00,000 of bitcoin. You swap it for ether when it is worth ₹1,50,000. Ether then falls, and you swap it for another token at ₹1,10,000. Later you sell that token for ₹1,20,000 in rupees.
| Step | Value received | Cost | Gain or loss | Tax at 31.2% | 1% TDS |
|---|---|---|---|---|---|
| BTC swapped for ETH | ₹1,50,000 | ₹1,00,000 | +₹50,000 | ₹15,600 | ₹1,500 |
| ETH swapped for token | ₹1,10,000 | ₹1,50,000 | −₹40,000 | ₹0 (loss ignored) | ₹1,100 |
| Token sold for ₹ | ₹1,20,000 | ₹1,10,000 | +₹10,000 | ₹3,120 | ₹1,200 |
| Total | Real profit ₹20,000 | ₹18,720 | ₹3,800 |
You started with ₹1,00,000 and ended with ₹1,20,000, a real profit of ₹20,000. The tax is ₹18,720, or 93.6% of it, because the ₹40,000 loss in the middle can’t cut the ₹50,000 gain before it. After tax you keep ₹1,280.
The TDS isn’t an extra cost. The ₹3,800 deducted across the three moves is credited to your PAN and counts against the ₹18,720, leaving ₹14,920 still to pay, but only if you report it in your return.
BtcMedia verdict: in India, swapping doesn’t defer tax the way it might feel like it does. If you’re tempted to rotate coins often, each rotation that lands on a gain locks in tax, while each one that lands on a loss gives you nothing back.
How TDS works on a swap
The Income Tax Department’s TDS guidance on VDAs says that in a swap both sides may need to deduct, because each person is both a buyer and a seller. CBDT’s 2022 circular, as reported by The Hindu, said each party must pay the tax and show proof before the coins are exchanged.
On an Indian exchange, the exchange may deduct on both legs on your behalf under a written agreement, which is how most users see it. On a decentralised exchange such as Uniswap nobody deducts anything, but the gain is still taxable and the paperwork is yours. The FIU-IND registered exchange checker shows which exchanges are registered in India.
What it means for Indian investors
- Keep a record of the rupee value of both coins at the moment of every swap. That value is both the sale price of one coin and the cost of the next.
- Treat a swap that would lock in a big gain like a cash sale. Run it through the crypto tax calculator first.
- If you made dozens of swaps, the Schedule VDA CSV builder turns trades into ITR rows, and our explainers on why an ETH loss won’t cut BTC tax and USDT tax cover the related rules. Ether prices in rupees are on the Ethereum price page.
FAQ
Is swapping BTC for USDT taxable in India? Yes. USDT is also a virtual digital asset, so moving into a stablecoin is a transfer of the BTC and any gain is taxed at 31.2%.
Do I pay tax if I never converted to rupees? Yes. The tax applies on transfer, not on cash withdrawal. Each swap at a gain is a taxable event in the year it happens.
Can a loss on one swap reduce tax on another? No. Crypto losses can’t be set off against crypto gains or carried forward to later years.
How we calculated this: illustrative ₹ values, 30% tax plus 4% cess (31.2%), 1% TDS on each transfer’s value, no surcharge or fees; rules as of 30 October 2026 IST. This is not financial or tax advice. Check your own case with a chartered accountant.