If you booked a profit on Bitcoin, Ethereum or any token this year, the tax rules in India are stricter than almost anything else in your portfolio. Crypto tax in India is a flat 30% on your gains, plus a 1% TDS deducted on every sale — regardless of your income slab, how long you held, or how much you spent on fees. There is no long-term discount, no expense deduction beyond what you paid to buy the coin, and no way to set a loss against your salary or your equity gains. This guide breaks down exactly how Section 115BBH and Section 194S work, walks through a worked example in rupees, compares crypto tax with stock-market tax, and shows you how to report it all in Schedule VDA of your income tax return.
Source: Income Tax Act, Sections 115BBH & 194S, applicable FY 2025-26.
What crypto tax in India looks like in 2026
India does not ban crypto, but it taxes it heavily and treats it as a category of its own called a Virtual Digital Asset, or VDA. That label covers Bitcoin, Ethereum, most altcoins, stablecoins and NFTs. The moment you transfer a VDA — selling it for rupees, swapping one coin for another, or using it to buy something — the income tax rules switch on.
Two provisions do the heavy lifting. Section 115BBH sets a flat 30% tax on the gain, and Section 194S puts a 1% TDS on the sale value itself. A third piece, Schedule VDA in your income tax return, is where you declare all of it. These have applied since the 2022 Budget and continue unchanged for FY 2025-26 (assessment year 2026-27).
The harshness is deliberate. Unlike shares or mutual funds, crypto gets no holding-period benefit, no indexation, and no exemption threshold. Whether you are a first-time buyer who put in ₹5,000 or an active trader, the same 30% applies. If you are still deciding which coins to hold and how to store them safely, our guide on crypto cold wallets versus hot wallets pairs well with getting the tax side right from day one. Understanding the tax before you trade is not optional — a structured cryptocurrency course builds this foundation properly instead of leaving you to piece it together after a tax notice arrives.
Section 115BBH: the flat 30% tax on your crypto gains
Section 115BBH is the rule that fixes the rate. Any income from transferring a VDA is taxed at a flat 30%, plus the applicable surcharge and a 4% health and education cess. For most people the effective rate lands a little above 30% once cess is added; higher earners also carry surcharge on top.
The rate is only half the story. The bigger sting is what you are not allowed to subtract.
What you can and cannot deduct
When you calculate your crypto gain, the law lets you subtract exactly one thing: the cost of acquisition — what you paid to buy the coin. Nothing else qualifies. Exchange trading fees, network or gas fees, internet costs, advisory charges, the price of a hardware wallet — none of them are deductible. Two people with the same gross profit pay the same tax, even if one spent far more on fees to earn it.
There is also no distinction between short-term and long-term. Hold a token for three days or three years, the tax is 30% either way. And you cannot claim the usual capital-gains exemptions such as Section 54 or 54F that property and equity investors sometimes use. The gain is ring-fenced and taxed on its own terms.
Section 194S: the 1% TDS on every crypto sale
Section 194S adds a second layer that catches people by surprise, because it applies even when you make no profit. A 1% TDS is deducted on the sale value of a VDA transfer — not on the gain, on the full amount. Sell ₹1,00,000 of crypto and ₹1,000 is deducted at source, whether that sale was at a profit or a loss.
It does not apply to every tiny trade, though. TDS kicks in once your aggregate transfers in a financial year cross a threshold:
- ₹50,000 a year for "specified persons" — broadly, individuals and HUFs without business income, or with business turnover up to ₹1 crore (or professional receipts up to ₹50 lakh) in the previous year. Most retail investors sit here.
- ₹10,000 a year for everyone else.
On an Indian exchange, the platform deducts this 1% for you and deposits it against your PAN, so it shows up in your Form 26AS. That deducted amount is not a cost — it is an advance against your final tax bill, and if your total TDS is more than the 30% you actually owe, the excess is refundable when you file your return.
Worked example: how 30% tax and 1% TDS stack up on one trade
| Step | Amount |
|---|---|
| Bought 1 token for | ₹1,00,000 |
| Sold it later for | ₹1,60,000 |
| Exchange + gas fees paid (not deductible) | ₹1,200 |
| Taxable gain (cost of acquisition only subtracted) | ₹60,000 |
| Tax at 30% + 4% cess | ₹18,720 |
| 1% TDS already deducted on the ₹1,60,000 sale | ₹1,600 (credited in 26AS) |
| Balance tax still payable | ₹17,120 |
Illustration applying Sections 115BBH and 194S. Figures are hypothetical; surcharge ignored for simplicity.
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The quickest way to feel how heavy crypto tax is in India is to place it next to listed equity shares. Both are market assets, yet the tax treatment could hardly be more different. Under the Finance Act 2024, long-term gains on listed shares are taxed at 12.5% above a ₹1.25 lakh yearly exemption, and short-term gains at 20%. Crypto gets none of that relief.
Crypto's 30% flat rate towers over equity tax rates
Source: Income Tax Act Section 115BBH; equity rates per Finance Act 2024. Crypto rate excludes surcharge and cess.
Crypto is taxed harder than shares on every count
| Feature | Crypto / VDA | Listed equity shares |
|---|---|---|
| Tax rate | Flat 30% + surcharge + 4% cess | 12.5% LTCG / 20% STCG |
| Holding-period benefit | ✗ None — 30% always | ✓ Long-term rate is lower |
| Exemption threshold | ✗ None | ✓ ₹1.25 lakh LTCG exempt |
| Deductions | ✗ Cost of acquisition only | ✓ Cost + eligible transfer costs |
| Loss set-off | ✗ Not allowed — even coin to coin | ✓ Allowed within CG rules |
| Loss carry-forward | ✗ Not allowed | ✓ Up to 8 years |
| TDS on sale | 1% (Section 194S) | No TDS (STT applies instead) |
Source: Income Tax Act Sections 115BBH & 194S; equity rates per Finance Act 2024.
Read down that table and the design becomes obvious: crypto is taxed to discourage speculation, not to reward patient investing. That is why understanding the tax is part of the trade itself, not an afterthought at filing time.
The rules that trip investors up
Most crypto tax mistakes in India are not about the 30% rate — people know that number. They come from the rules around it.
- No set-off between coins. If you make ₹60,000 on Bitcoin and lose ₹40,000 on another token in the same year, you still pay 30% on the full ₹60,000. The loss does not reduce it, cannot offset your salary or equity gains, and cannot be carried to next year. It simply disappears for tax purposes.
- TDS on swaps and crypto-to-crypto trades. The 1% is not limited to selling for rupees. Swapping one token for another is also a transfer, and TDS and the 30% both apply to the value exchanged.
- Airdrops, staking and rewards are income too. Tokens you receive free are generally taxed when received, and again if you later sell at a gain. Our explainers on crypto airdrops and Ethereum staking rewards cover why these are easy to forget at filing time.
- Not reporting is now far riskier. In the 2025 Budget, VDAs were brought into Section 158B, which deals with undisclosed income in search and block-assessment cases, with effect from 1 February 2025. Unreported crypto can be assessed for up to six preceding assessment years, and a new Section 285BAA obliges reporting entities to share your transaction data with the tax department. The gap between what exchanges report and what you declare is closing fast.
The safe assumption in 2026 is that the tax department already has your exchange data. Filing accurately is cheaper than being reassessed later.
How to report crypto in your ITR (Schedule VDA)
Crypto income has its own home in the return: Schedule VDA, introduced with these rules in 2022. Here is the sequence to get it right for FY 2025-26.
Source: Income Tax Department, Schedule VDA reporting, AY 2026-27.
A few pointers that save trouble. Use ITR-2 if you invest occasionally and report gains as capital gains; use ITR-3 if you trade frequently and treat it as business income. Note that ITR-1 and ITR-4 cannot hold crypto income at all. In Schedule VDA you enter each transfer separately — the coin, date of acquisition, cost, date of transfer and sale value — so clean records from your exchange are essential. Finally, match the TDS in Schedule VDA against your Form 26AS so you claim every rupee of the 1% back against your 30% liability.
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Start the Cryptocurrency Training CourseFrequently Asked Questions
Is cryptocurrency legal in India in 2026?
Yes, holding and trading crypto is legal in India, and the fact that it is taxed under Sections 115BBH and 194S confirms the government recognises it as a taxable asset. It is not, however, legal tender — you cannot force anyone to accept it as payment. Legal status and tax status are two different things; crypto is taxed, but that is not the same as being an approved or guaranteed investment.
How much tax do I pay on crypto profit in India?
A flat 30% on the gain, plus the applicable surcharge and a 4% health and education cess, under Section 115BBH. The only amount you can subtract is what you paid to buy the coin — not fees, not other expenses. The rate is the same whether you held the coin for a day or several years.
Do I pay 1% TDS even if I make a loss?
Yes. The 1% TDS under Section 194S is deducted on the sale value of the transfer, not on your profit, so it applies even to a loss-making sale once your yearly transfers cross ₹50,000 (or ₹10,000 for non-specified persons). It is not an extra cost though — it is credited in your Form 26AS and adjusted against your final tax, and any excess is refundable.
Can I set off crypto losses against my salary or stock gains?
No. Losses from a VDA cannot be set off against any other income — not salary, not business income, not capital gains from shares — and not even against gains from a different crypto coin. They also cannot be carried forward to future years. This no-set-off rule is one of the harshest features of India's crypto tax.
Which ITR form do I use to report crypto gains?
Use ITR-2 if you are an investor reporting crypto as capital gains, or ITR-3 if you are a frequent or professional trader reporting it as business income. Both contain Schedule VDA, where you declare each transfer. ITR-1 and ITR-4 cannot be used for crypto income at all, so filing the wrong form can invite a defective-return notice.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. Markets carry risk — please do your own research or consult a qualified financial professional before investing. NIFM provides training and exam preparation; certification exams conducted by regulatory or professional bodies are administered by those bodies independently.
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