Short answer: yes, it is taxed. A common belief among new Indian traders is that profit only “counts” once it lands in a bank account. The law doesn’t look at your bank at all. It looks at the moment you part with the coin.
What actually triggers the tax
From 1 April 2026 crypto is taxed under the Income-tax Act, 2025. Income from the transfer of a virtual digital asset is taxed at a flat 30% under section 194(1) (the old section 115BBH), with only the purchase cost deductible. We mapped the old and new section numbers in our crypto tax sections guide.
The Act’s own definition in section 2(109) says a transfer includes “the sale, exchange or relinquishment of the asset”. So each of these is a taxable event on the day it happens:
- selling Bitcoin for rupees, even if the rupees stay in your exchange wallet;
- swapping one coin for another, including Bitcoin into USDT;
- paying for something with crypto.
Withdrawing rupees to your bank is none of these. It is just moving money you already own. That is why “I never withdrew” is not a defence, and why “I’m still holding” is: an unsold coin that has doubled owes nothing until you transfer it.
Four traders, one ₹50,000 gain
Take a trader who bought ₹1,00,000 of Bitcoin and later got ₹1,50,000 for it. The tax works out at 30% plus 4% health and education cess, so 31.2% of the gain.
| What they did | Taxable transfer? | Gain | Tax owed |
|---|---|---|---|
| Sold for ₹1.5 lakh, withdrew to bank | Yes | ₹50,000 | ₹15,600 |
| Sold for ₹1.5 lakh, left INR on the exchange | Yes | ₹50,000 | ₹15,600 |
| Swapped the BTC for ₹1.5 lakh of USDT | Yes | ₹50,000 | ₹15,600 |
| Still holds the BTC, now worth ₹1.5 lakh | No | ₹0 (unrealised) | ₹0 |
The first three rows are identical in the eyes of the law. Only the last trader has no bill yet. You can test your own numbers in the crypto tax calculator for India, and the swap case in the crypto swap tax calculator.
The 1% TDS is a receipt, not the bill
On an Indian exchange, the sale itself also attracts 1% TDS under section 393(1) (the old 194S), as the Income Tax Department’s note on Form 141 describes. On a ₹1,50,000 sale that is ₹1,500, taken whether or not you withdraw.
That deduction is the reason the “I never withdrew” belief fails in practice too. The TDS is reported against your PAN, so the sale shows up in your tax records. The ₹1,500 is credit against your ₹15,600 bill, which leaves ₹14,100 still to pay. Check the split with the crypto TDS calculator.
What it means for Indian investors
- The date of the sale decides the year. A sale in November 2026 belongs to FY 2026-27, even if the rupees sit on the exchange until 2028.
- Advance tax may apply now. If your total tax for the year crosses ₹10,000 after TDS, instalments are due through the year, the next on 15 December. Our crypto advance tax calculator shows what is due by when.
- Losses don’t net off. A loss on one coin cannot reduce the gain on another under the 30% rule, so a “wash” of trades left on the exchange can still owe tax.
- Leaving money on the exchange adds risk, not shelter. Exchange balances are exposed to hacks and freezes, and they buy no tax delay.
BtcMedia verdict
The tax clock starts when you sell or swap, not when you cash out. If you traded this year and left the proceeds on an exchange or in stablecoins, work out the gain now and plan for the 15 December advance-tax date rather than discovering it at ITR time.
How we calculated this: ₹1,00,000 cost and ₹1,50,000 sale value as a worked example; tax at 30% plus 4% cess on the gain; TDS at 1% of sale value; rules as published by the Income Tax Department, checked 1 November 2026 IST.
FAQ
Is crypto taxed if I don’t withdraw to my bank account in India? Yes. The tax applies when you sell, swap or spend the crypto. Moving rupees to your bank is not a taxable event and does not change the bill.
Is converting Bitcoin to USDT taxable in India? Yes. A swap is an exchange of one asset for another, which counts as a transfer, so any gain on the Bitcoin is taxed at 31.2%.
Do I pay tax on crypto that has gone up but I haven’t sold? No. An unrealised gain is not taxed. The tax applies only when you transfer the coin.
This article is for information only and is not financial or tax advice. Check your own case with a qualified tax professional.