Cryptocurrency taxation in India has evolved into a well-defined framework since 2022, bringing clarity—and complexity—for investors, traders, and businesses. With a flat 30% tax on gains, 1% TDS on transactions, and strict rules around loss offsets and deductions, understanding the regulatory landscape is essential for compliance and financial planning.
This comprehensive guide breaks down everything you need to know about crypto taxation in India—covering core policies, reporting requirements, tax calculation methods, and key compliance considerations.
What Are Virtual Digital Assets (VDAs) Under Indian Law?
In India, cryptocurrencies and NFTs are legally classified as Virtual Digital Assets (VDAs) under Section 2(47A) of the Income Tax Act. This definition includes any information, code, number, or token generated through cryptographic means that isn't recognized as legal tender—Indian or foreign.
While broad in scope, this excludes items like gift cards or vouchers. Essentially, all major crypto assets—including Bitcoin, Ethereum, stablecoins, and NFTs—fall under the VDA umbrella.
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Is Cryptocurrency Taxed in India?
Yes. Since the 2022 Union Budget announcement, gains from cryptocurrency transactions have been subject to taxation. The government clarified that crypto is not legal currency but a taxable digital asset.
All types of crypto investors—individuals, traders, or businesses—are required to report income from VDAs and pay applicable taxes. Whether you're trading, staking, mining, or receiving crypto as payment, tax implications apply uniformly.
How Is Crypto Taxed in India?
The Indian tax regime for crypto is built on two key provisions:
- Section 115BBH: Imposes a 30% tax on profits from the transfer of virtual digital assets (plus applicable surcharge and 4% health & education cess).
- Section 194S: Mandates 1% TDS (Tax Deducted at Source) on VDA transfers exceeding ₹50,000 in a financial year (or ₹10,000 for specified cases), effective from July 1, 2022.
Key Features of India’s Crypto Tax Rules
- Flat 30% tax rate applies regardless of holding period—no distinction between short-term and long-term capital gains.
- No offsetting of losses: Losses from one crypto transaction cannot be used to reduce taxable gains from another.
- No expense deductions: Only the purchase cost can be considered; transaction fees, electricity costs (for miners), or software expenses are not deductible.
- Mandatory reporting: All crypto income must be declared in Schedule VDA of the Income Tax Return (ITR).
Which Crypto Transactions Are Taxable?
You are liable to pay tax if you engage in any of the following activities:
- Selling crypto for fiat currency (INR)
- Exchanging one cryptocurrency for another (e.g., BTC to ETH)
- Using crypto to buy goods or services
- Receiving crypto as salary or payment for services
- Getting tokens via airdrops
- Earning rewards from staking or yield farming
- Mining new coins
- Accepting crypto gifts valued over ₹50,000 from non-relatives
Each of these triggers a taxable event under Section 115BBH.
How to Calculate Crypto Tax in India
The formula is straightforward:
Taxable Income = Sale Value – Purchase Cost
This net gain is taxed at 30%, plus surcharge and cess. Let's illustrate with an example:
Example:
Mr. X buys Bitcoin for ₹60,000 and sells it for ₹80,000 → Profit = ₹20,000
He also buys Ethereum for ₹40,000 and sells for ₹30,000 → Loss = ₹10,000
Exchange fee: ₹1,000
Despite the net profit being ₹19,000 (after accounting for loss and fees), only the ₹20,000 gain is taxed. The ₹10,000 loss cannot be offset, and the ₹1,000 fee is not deductible.
Tax Payable: ₹20,000 × 30% = ₹6,000 (+ surcharge & 4% cess)
Understanding TDS on Crypto Transactions (Section 194S)
TDS ensures tax collection at the source during VDA transfers:
- Rate: 1%
- Threshold: Applies when cumulative transactions exceed ₹50,000 annually (₹10,000 for certain government-related payments)
- Responsibility: The payer must deduct TDS before releasing funds
Scenarios:
- Exchange-based trades: Indian exchanges automatically deduct TDS.
- P2P transactions: Buyers must manually deduct TDS and file Form 26QE or 26Q.
- Crypto-to-crypto swaps: TDS applies to both buyer and seller at 1% each.
Even if TDS is deducted, you still need to report full income in ITR and pay the balance tax if due.
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Tax Treatment of Specific Crypto Activities
Airdrops
Airdropped tokens are taxable when received at their fair market value on the date of receipt (per Rule 11UA). If no trading exists yet, no immediate tax applies.
Example:
Bob receives 20,000 ABC tokens on April 1, 2025. Market price: ₹10/token → Taxable value = ₹2 lakh
Tax: ₹60,000 (30%)
If he later sells them for ₹5 lakh, cost basis = ₹2 lakh → Gain = ₹3 lakh → Tax = ₹90,000
Mining
Mining rewards are taxed at 30% based on the market value at receipt. Cost of acquisition is considered zero—no deduction for electricity or hardware costs.
When mined coins are sold, gains are calculated as:
Sale Price – Market Value at Time of Receipt
Staking & Yield Rewards
Staking income is taxed as income from other sources at 30%. The fair market value at receipt forms the cost basis for future sales.
Transferring coins to a staking pool or wallet is not a taxable event.
Gifts
Crypto received as a gift is taxable if:
- From a non-relative
- Value exceeds ₹50,000 in a financial year
Gifts from relatives, inheritance, marriage, or wills are exempt.
Reporting Crypto in Your ITR
For FY 2024–25 (AY 2025–26), use:
- ITR-2: If reporting crypto gains as capital receipts
- ITR-3: If trading frequently (treated as business income)
Both forms include Schedule VDA, where all VDA transactions must be disclosed with:
- Nature of transaction
- Dates
- Sale and purchase values
- Gains or losses
Failure to report may lead to penalties or scrutiny.
Can You Carry Forward Crypto Losses?
No. Under Section 115BBH, crypto losses cannot be carried forward or set off against other income—including future crypto profits. This makes strategic tax planning crucial.
Company-Level Disclosure Requirements
Under the Companies Act, businesses must disclose:
- Profit or loss from crypto transactions
- Fair value of crypto holdings on balance sheet date
This applies only to companies—not individual taxpayers—but highlights increasing regulatory oversight.
Frequently Asked Questions (FAQs)
Q: What is the tax rate on cryptocurrency in India?
A: Gains from crypto transfers are taxed at a flat 30%, plus applicable surcharge and 4% health & education cess. No deductions or loss offsets are allowed.
Q: Do I pay tax when I just buy crypto?
A: No. Buying crypto with INR is not a taxable event. Tax applies only when you sell, exchange, spend, or receive crypto (e.g., via staking or airdrops).
Q: Is TDS applicable on all crypto transactions?
A: Yes. From July 1, 2022 onward, 1% TDS applies to VDA transfers exceeding ₹50,000 annually (₹10,000 in specific cases). The responsibility lies with the payer.
Q: How do I report staking or mining income?
A: Report the fair market value of earned coins at receipt as income under Schedule VDA. When sold later, calculate capital gains based on that value.
Q: Can I use crypto losses to reduce my taxable income?
A: No. Losses from crypto transactions cannot be offset against any other income—including salary or other crypto gains—and cannot be carried forward.
Q: Which ITR form should I use for crypto?
A: Use ITR-2 for occasional traders reporting capital gains. Use ITR-3 if you trade frequently and income is treated as business income.
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Final Thoughts
India’s crypto tax framework prioritizes transparency and compliance over flexibility. With a flat 30% rate, no loss adjustments, and mandatory reporting via Schedule VDA, investors must maintain meticulous records of every transaction.
Staying informed and using reliable tracking tools can help ensure accurate reporting and avoid penalties. As regulations evolve, proactive compliance remains the best strategy for long-term success in India’s growing digital asset ecosystem.
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