Crypto Tax in India 2026: 30% Rate, 1% TDS, Schedule VDA

Indian crypto investors face a flat 30% tax on VDA gains, plus 4% cess and 1% TDS on transfers, under crypto tax india 2026. Only acquisition cost can be deducted; losses cannot be offset against other income or gains, while Schedule VDA requires transaction-level reporting.

Crypto tax in India 2026 is a flat 30% on every gain, plus 4% cess, with a 1% TDS deducted at the point of transfer. There is no long-term rate, no basic exemption on the gain, and no way to set a loss off against anything — not against your salary, not against capital gains, not even against a profit on a different coin. The only deduction allowed is what you paid to acquire the asset.

That single paragraph is the whole regime in outline. The rest of this page covers how the 30% is actually computed, when the 1% TDS bites and at what threshold, what Schedule VDA in your ITR demands transaction by transaction, and the specific situations — airdrops, staking, gifts, futures on offshore exchanges — where taxpayers most often get it wrong.

How the 30% crypto tax in India 2026 is computed

The charging provision is Section 115BBH, introduced by the Finance Act, 2022 and carried forward under the Income Tax Act, 2025. It applies to income from the transfer of a Virtual Digital Asset (VDA), a term defined widely enough to cover cryptocurrencies, NFTs and most tokenised instruments.

The computation is deliberately narrow:

• Rate: 30% flat, regardless of how long you held the asset. A coin sold after three years is taxed exactly like one sold after three hours.
• Add cess: 4% health and education cess brings the effective minimum to 31.2%. Surcharge at the higher slabs can push the all-in rate to roughly 42.7%.
• Deduction allowed: cost of acquisition only. Nothing else.
• Deductions specifically denied: exchange fees, gas fees, brokerage, internet costs, advisory fees, depreciation, and any expenditure that is not the purchase price itself.
• No basic exemption: the 30% applies from the first rupee of gain, even if your total income is below the taxable threshold.

A worked example makes the narrowness obvious. You buy one token for ₹4,00,000, pay ₹2,000 in exchange fees, and later sell for ₹5,00,000 with ₹2,500 in fees. Your economic profit is ₹95,500. Your taxable gain under 115BBH is ₹1,00,000, because neither fee is deductible. Tax at 31.2% is ₹31,200 — roughly a third of a gain you never fully received.

The loss rule is the part that surprises people

Section 115BBH denies set-off entirely. This is stricter than any other head of income in the Act, and it is where most of the real money is lost.

• A VDA loss cannot be set off against salary, business income, house property or interest.
• A VDA loss cannot be set off against capital gains on shares or property.
• A VDA loss cannot be set off against a gain on another VDA. Losing ₹2,00,000 on one coin and making ₹2,00,000 on another leaves you flat economically and still liable for 30% on the ₹2,00,000 gain.
• A VDA loss cannot be carried forward to a future year.

Read that third bullet twice. Gains are taxed transaction by transaction; losses simply vanish. An active trader who ends the year exactly break-even can still owe substantial tax, because only the winning trades are counted.

Section 194S: the 1% TDS and its two thresholds

Section 194S requires 1% tax to be deducted at source on payment for the transfer of a VDA. The threshold depends on who you are:

• ₹50,000 in a financial year for specified persons — broadly, individuals and HUFs without business income above the audit limits.
• ₹10,000 in a financial year for everyone else.

Three things about 194S are routinely misunderstood:

It is not the final tax. The 1% is an advance collection and a reporting trail. Your liability remains 30% of the gain; the TDS is credited against it when you file. If you traded actively at a loss, you may have paid meaningful TDS while owing nothing — and the only way to recover it is to file a return and claim the refund.

It applies to the gross consideration, not the profit. Sell ₹10,00,000 of a coin at a loss and ₹10,000 of TDS is still deducted.

Crypto-to-crypto trades are covered. Swapping one token for another is a transfer of both. Where consideration is in kind rather than cash, the obligation to ensure tax has been paid before releasing the asset sits with the parties, and Indian exchanges handle this at the platform level. On a peer-to-peer trade or a foreign platform, it does not disappear — it becomes yours.

Schedule VDA: what your ITR actually asks for

Reporting happens in Schedule VDA, available in ITR-2 and ITR-3. It is not a summary field. For each disposal you must supply:

• date of acquisition
• date of transfer
• cost of acquisition
• sale consideration
• the resulting income

An investor with four hundred trades in a year files four hundred rows. This is the practical reason to pull a full transaction statement from every exchange, wallet and chain you touched before you begin, rather than reconstructing it in July.

Whether the income belongs under capital gains or business income depends on your facts — frequency, volume, intention, whether you run it as a trade. The 30% rate is identical either way, but the classification affects which ITR form you file and how the rest of your return behaves.

The situations people get wrong

Airdrops and staking rewards

Receiving tokens for free is not outside the net. An airdrop is taxable at fair market value on the date of receipt, as income from other sources at your slab rate. When you later sell, 115BBH applies to the gain with that previously taxed value as your cost. Two taxable events, two different rates.

Staking rewards need a caveat: the Act contains no provision dealing with them specifically. The conservative and widely adopted treatment is the same as an airdrop — other sources at slab rate on receipt, then 115BBH on disposal. That is the prudent position rather than a settled one, and anyone with material staking income should take advice rather than rely on a general rule.

Gifts

A VDA received as a gift is taxable in the recipient’s hands under Section 56(2)(x) if the value exceeds ₹50,000, unless it comes from a relative as defined in the Act, or on the occasion of marriage. The exemption for relatives is narrower than most people assume.

Offshore exchanges and derivatives

Using a foreign platform changes nothing about your liability as an Indian resident. It changes who does the compliance: the exchange is not deducting 194S TDS for you, and it is not filing anything on your behalf. Foreign holdings may also trigger Schedule FA disclosure, which carries penalties under the Black Money Act that dwarf the tax itself. Crypto derivatives traded offshore add a further question about whether the income is even VDA income or something else — worth professional advice rather than a forum answer.

Mining

Two separate consequences. Newly mined crypto is taxed as income from other sources at your slab rate when it arises. On a later sale the cost of acquisition is treated as nil, so the whole sale value is charged at 30%. Electricity, hardware and infrastructure costs are not deductible at either stage.

What compliance looks like in practice

Every exchange and VDA service provider operating in India must register with the Financial Intelligence Unit (FIU-IND) and run KYC, transaction monitoring and suspicious transaction reporting. The practical consequence for you is that the department already has a data trail. TDS filings under 194S, exchange reporting and AIS entries mean unreported disposals are visible.

A workable annual routine:

• Export complete transaction history from every platform and wallet at year end, not at filing time.
• Reconcile TDS credits in Form 26AS and AIS against your own records before filing.
• Record cost of acquisition in rupees at the transaction date for anything bought in a foreign currency or another token.
• Keep the trail for airdrops and staking separately — the two-event treatment needs two sets of values.
• File the return even in a loss year, or you forfeit the TDS refund.

Is any of this likely to change?

The core provisions have been substantially unchanged since the Finance Act, 2022 and have been carried into the Income Tax Act, 2025. Industry submissions asking for loss set-off and a lower TDS rate have been made repeatedly and have not been accepted. Plan on the current regime; treat relief as upside rather than assumption.

The regulatory picture, as distinct from the tax picture, is still moving — a multi-regulator model splitting oversight between SEBI, the RBI and the Finance Ministry has been discussed but not adopted. Tax treatment does not wait for that debate to resolve.

Frequently asked questions

Is crypto legal in India in 2026?

Buying, selling and holding crypto is legal. It is not legal tender, and it is regulated as a Virtual Digital Asset rather than as currency. Taxing an activity is not the same as licensing it — the 30% rate implies neither approval nor investor protection.

Do I pay tax if I only hold and never sell?

No. Section 115BBH taxes the transfer. Unrealised appreciation is not taxed. Receiving tokens through an airdrop or staking reward is a receipt, however, and that is taxable even if you never sell.

Can I avoid the 30% by trading through a foreign exchange?

No. Indian residents are taxed on global income. The foreign platform simply means nobody is doing the compliance for you, and foreign asset disclosure obligations may add penalty exposure.

What if my total income is below the exemption limit?

The 30% still applies to the VDA gain. There is no basic exemption within 115BBH. The rest of your income continues to be taxed under the normal slabs.

How do I get my 1% TDS back if I lost money?

File your return, report the transactions in Schedule VDA, and claim the TDS credit. A loss year with TDS deducted usually produces a refund — but only if you file.