Crypto Tax in India: Understanding Cryptocurrency Taxation

Introduction

The Income Tax Department (ITD) has not yet issued detailed, crypto-specific tax guidelines for Indian investors. Still, the Income Tax Act outlines two major provisions—Section 115BBH and Section 194S—that dictate how Virtual Digital Assets (VDAs), including cryptocurrencies, NFTs, tokens, and similar assets, are taxed. Under these rules, profits from VDDA transactions can attract a flat 30% tax, a 1% TDS deduction, and in some cases, tax at your applicable income-tax slab for non-trading income.

This guide explains everything you need to know about crypto taxation in India for 2024, covering the latest rules on tax rates, the 1% TDS mechanism, how to report VDAs in your Income Tax Return (ITR) using Schedule VDA, and other essential updates.

What Are Cryptocurrencies?

Cryptocurrencies are digital or virtual forms of money that use cryptography to secure transactions, making them resistant to counterfeiting and double-spending. Unlike government-issued fiat currencies, cryptocurrencies run on decentralized blockchain networks—distributed ledgers maintained by numerous computers (nodes).

Bitcoin is the most widely known cryptocurrency, but thousands of alternative digital assets, known as altcoins—such as Ethereum, Litecoin, and Ripple—also exist. Cryptocurrencies can be used for peer-to-peer payments, remittances, investing, and in some cases, purchasing goods and services. They can be traded on exchanges, stored in digital wallets, and utilized across various blockchain-based applications.

Is Crypto Taxed in India?

Yes. Cryptocurrency is taxed in India. In the 2022 Union Budget, the government officially classified cryptocurrencies as Virtual Digital Assets (VDAs) and introduced a dedicated tax structure for them.

Crypto Tax Rate in India

In India, profits from selling, trading, or spending cryptocurrency are taxed at a flat 30% rate. Additionally:

1% TDS applies on crypto transactions exceeding
- ₹50,000 in a financial year (general cases)
- ₹10,000 in specific cases (e.g., specified person criteria)
Income from staking, airdrops, mining, and similar activities may be taxed according to your individual income-tax slab rate.

Latest Updates on Crypto Tax in India

2024

The Income Tax Return (ITR) for FY 2023–24 includes Schedule VDA for reporting gains from cryptocurrencies and other digital assets.
Deadline to file ITR for FY 2023–24: July 31, 2024, with a belated return option available until December 31, 2024.

2023

Income from VDAs must be classified as:
- Capital gains (if held as an investment)
- Business income (if traded frequently or business-related)
Taxpayers earning business income from crypto must file ITR-3 instead of ITR-2.
Penalties were introduced for failure to deduct or deposit TDS under Sections 271C and 276B.

2022

Clarifications issued on Section 115BBH state that:
- Losses from one VDA cannot be set off against gains from another VDA or any other income.
- No deductions are allowed except the cost of acquisition.
Gifts of digital assets are taxable in the hands of the recipient.
A 30% tax on crypto gains has been effective since April 1, 2022.
A 1% TDS on crypto transactions has been in force since July 1, 2022 under Section 194S.
Budget 2022 introduced Section 2(47A), formally defining Virtual Digital Assets under the Income Tax Act.

Overview of Cryptocurrency Taxation in India

In India, cryptocurrencies and other digital assets are categorized as Virtual Digital Assets (VDAs) under the Income Tax Act. The taxation framework for these assets is clearly defined and applies to all investors and traders. Below is a simplified breakdown of how crypto taxation works:

Definition of Virtual Digital Assets (VDAs)

Under Section 2(47A), VDAs include all forms of crypto assets—such as cryptocurrencies, NFTs, and various types of digital tokens. This provision establishes the legal foundation for taxing digital assets.

Crypto Tax Rates Under Section 115BBH

Introduced in the Union Budget 2022, Section 115BBH enforces a flat 30% tax (plus surcharge and 4% cess) on profits from cryptocurrency transactions, effective from April 1, 2022. This tax rate applies uniformly, whether the income arises from investing or active trading—there is no differentiation between short-term or long-term gains.

Section 194S: 1% TDS on Crypto Transactions

From July 1, 2022, Section 194S mandates a 1% TDS on the transfer of crypto assets when the total transaction value exceeds ₹50,000 in a financial year (or ₹10,000 in certain specified cases). This provision ensures better tracking and compliance for crypto-related transactions.

Reporting Crypto Income

Indian taxpayers must classify and report their crypto earnings as:

Capital gains, if the assets are held for investment, or
Business income, if they are held for trading or commercial activity.

Tax Return Filing for Crypto Assets

From FY 2022–23 onward, a dedicated section called Schedule VDA (Virtual Digital Assets) has been added to the Income Tax Return (ITR) forms. This schedule is specifically designed to capture detailed information on crypto and NFT transactions, and it remains a requirement for FY 2023–24 as well.

30% Crypto Tax Rate in India: When Does It Apply?

In India, a 30% tax is levied on profits from cryptocurrency transactions in the following situations:

Selling crypto for INR or any other fiat currency
Exchanging one cryptocurrency for another (including stablecoins)
Using cryptocurrency to pay for goods or services

However, not every crypto-related activity is immediately taxed at 30%. In some cases, the Income Tax Department (ITD) treats the income as regular taxable income, which is then taxed according to your applicable slab rate. These situations include:

Receiving cryptocurrency as a gift
Earning crypto through mining
Being paid in cryptocurrency for professional services or work
Receiving staking rewards or airdrops

Once these cryptocurrencies are later sold, traded, or spent, any resulting gains become taxable at the 30% rate under Section 115BBH.

Which Crypto Transactions Are Taxed in India?

Below is a simplified guide to how different types of crypto transactions are taxed in India:

Transaction	Tax Treatment
Buying crypto	1% TDS deducted by the exchange (not applicable to most international or P2P transactions)
Selling crypto	30% tax on profits
Trading one crypto for another	30% tax on profits
Using crypto for purchases	30% tax on profits
Holding crypto	No tax
Transferring crypto between your own wallets	No tax
Receiving crypto via airdrops	Taxed as income at your slab rate; 30% tax applies when sold
Receiving crypto from hard forks	Taxed as income at your slab rate on receipt; 30% tax when sold
Receiving crypto as a gift	Taxed in the hands of the recipient, except gifts from specified relatives or those under ₹50,000
Donating crypto	30% tax on any gains; donations of crypto are not eligible for tax deductions
Mining rewards	Taxed as income at your slab rate; 30% tax applies upon sale
Staking rewards	Taxed as income at your slab rate; 30% tax applies upon sale

Tax Guide for DeFi Transactions in India

Decentralized Finance (DeFi) enables users to borrow, lend, trade, and earn rewards without relying on traditional banks, using blockchain-based protocols. Although the Income Tax Department has not issued DeFi-specific tax rules, these activities are covered under the broader taxation framework for Virtual Digital Assets (VDAs).

Here’s how DeFi-related income is generally taxed in India:

Income from liquidity mining, governance participation, or reward tokens is treated as regular income and taxed according to your individual income slab rate at the time you receive it.
Referral rewards and earnings from “play-to-earn” or “browse-to-earn” platforms (such as Brave or Permission.io) are also taxed at your individual slab rate upon receipt.

Later, if you sell, trade, or spend any of these tokens, profits from those transactions are taxed at 30%, in line with India’s standard VDA taxation rules.

Understanding the 1% TDS on Crypto Assets in India

India introduced a 1% Tax Deducted at Source (TDS) on crypto transactions to improve transparency and track digital asset activity. Here’s a clear overview of how it works and what it means for investors and traders.

What Is the 1% TDS on Crypto?

The 1% TDS applies to the transfer of crypto assets, meaning any transaction where ownership changes—such as selling, trading, or spending cryptocurrency. Simply moving crypto between your own wallets does not attract TDS.

Key Points to Know

Effective Date: The TDS rule has been applicable since July 1, 2022.
Who Deducts the TDS?
- Indian Exchanges: TDS is automatically deducted and deposited with the government.
- P2P and International Trades: The buyer must deduct and deposit the TDS.
- Crypto-to-Crypto Trades: Both parties are considered buyers and must each pay 1% TDS.

Specified Persons & Threshold Limits

Specified persons (individuals or HUFs) do not have to deduct TDS if their total crypto transactions do not exceed ₹50,000 in a financial year.
For all other taxpayers, the exemption limit is ₹10,000 per year.

Filing & Compliance Requirements

For Specified Persons:
TDS must be filed using Form 26QE within 30 days of the month of deduction. Since the form is not yet active on the tax portal, taxpayers must wait for updated instructions from the ITD.
For Other Taxpayers:
A TAN is required. TDS must be reported quarterly through Form 26Q, and payments must be made by the 7th of the following month. Due to the complexity, professional assistance is recommended.
Claiming TDS Credit:
You can claim the deducted TDS while filing your ITR to reduce your total tax payable.

Penalties for Non-Compliance

Section 271C — Failure to Deduct TDS:
A penalty equal to the amount of TDS that should have been deducted.
Section 276B — Failure to Deposit TDS:
Possible imprisonment from 3 months to 7 years, plus a fine.
Additional Enforcement Measures:
The government has tightened compliance rules, with penalties that may include a 100% penalty on the TDS amount and, in severe cases, up to 7 years of imprisonment.

Do You Pay Tax When You Buy Crypto in India?

Buying crypto with INR is tax-free, but certain rules apply under India’s crypto tax framework. Here’s what you need to know:

1. No Tax on Buying Crypto with INR

Purchasing cryptocurrency using fiat currency (like INR) does not attract any direct tax.
However, a 1% TDS may still apply.

2. 1% TDS on Crypto Purchases

Indian Exchanges:
The 1% TDS is automatically deducted and deposited with the government by the exchange.
P2P and International Platforms:
Buyers must deduct and deposit the 1% TDS themselves.
This requires filing Form 26QE (for specified persons) or Form 26Q (for others) and paying the deducted TDS to the seller.

3. Holding Crypto Is Tax-Free

Simply holding (HODLing) crypto does not create any tax liability.
Tax applies only when you sell, swap, or spend your crypto.

For long-term investors, keeping reliable transaction records is essential since some exchanges only retain historical data for 3–6 months. Crypto tax tools like Koinly can automate tracking and calculations.

4. Trading Crypto for Crypto

Exchanging one cryptocurrency for another is treated as a taxable event.
Any profit made is taxed at 30%.

Capital Gain Formula:
Fair Market Value (FMV) on trade date − Cost basis = Taxable gain

5. Buying Crypto With Stablecoins

Purchasing crypto using stablecoins (e.g., USDT) is considered a crypto-to-crypto trade, and any gains are taxed at 30%, similar to other crypto swaps.

Do You Pay Tax When You Sell Cryptocurrency in India?

Yes. Selling cryptocurrency in India is a taxable event. If you make a profit, the gain is taxed at a flat 30%, whether you sell for INR or exchange it for another cryptocurrency.

Selling Crypto for Fiat Currency (INR)

30% Tax on Profits:
Any gains earned from selling crypto for INR are taxed at a flat 30%.
1% TDS:
A 1% TDS is also applied to the transaction.
- On Indian exchanges, this TDS is deducted automatically.
- For P2P or international platforms, the buyer must deduct and deposit the TDS.

Selling Crypto for Another Cryptocurrency

30% Tax on Profits:
Trading one cryptocurrency for another is treated as a taxable transfer, and any profit is taxed at 30%.
1% TDS:
A 1% TDS applies to crypto-to-crypto trades as well. The seller must ensure that the TDS is deducted and deposited as required.

Do You Pay Tax When Transferring Crypto?

No. Transferring cryptocurrency between your own wallets is not taxable. Since the ownership of the asset doesn’t change, such movements are not treated as a “transfer of VDA” under tax laws. Despite the terminology used by the Income Tax Department (ITD), wallet-to-wallet transfers within your own control do not trigger any tax liability.

How Are Airdrops and Forks Taxed in India?

In India, airdrops and hard forks are generally treated like gifts—meaning they may be taxed when you receive them and again when you sell or use them.

Tax on Hard Forks

Soft Forks:
No new tokens are created, so no taxable event occurs.
Hard Forks:
If a hard fork results in new tokens being credited to your wallet, you must pay Income Tax at your applicable slab rate.
The taxable amount is based on the fair market value (FMV) in INR on the day you receive the new tokens.
Selling or Using Forked Coins:
When you later sell, trade, or spend these tokens, any profit is taxed at a flat 30%.
The cost basis is the FMV of the tokens on the date they were received.

Tax on Airdrops

Receiving an Airdrop:
Airdrops are treated as gifts, and the value received is taxed as income at your individual slab rate, based on the FMV in INR on the day of receipt.
Exemptions:
You may claim an exemption if the total value of gifts, including airdropped tokens, does not exceed ₹50,000 in a financial year.
Selling or Swapping Airdropped Tokens:
If you later sell or exchange airdropped tokens, any gains are taxed at 30%.
The cost basis is the FMV at the time the tokens were initially received.

How Are Gifts of Crypto Taxed in India?

In India, receiving cryptocurrency as a gift can create a tax liability, but several important exemptions apply. Here’s a clear breakdown:

Tax-Free Crypto Gifts

Gifts from Close Relatives:
Crypto received from immediate family—such as parents, siblings, spouses, and lineal ascendants or descendants—is fully exempt from tax.
Gifts Below ₹50,000:
If the total value of crypto gifts received from non-relatives during a financial year is under ₹50,000, no tax applies.
Special Circumstances:
Crypto received as a gift on weddings, via inheritance, or through a will is also tax-exempt.

Taxable Crypto Gifts

Gifts Over ₹50,000:
If the value of crypto gifts from non-relatives exceeds ₹50,000 in a financial year, the entire value becomes taxable at your income tax slab rate.

Donating Crypto

No Tax Deduction:
Donations of cryptocurrency to registered charities do not qualify for tax deductions.
30% Tax on Gains:
When you donate crypto, the act is treated as a disposal, and any profits are taxed at 30%, just like other crypto transactions.

Crypto Losses: What Indian Investors Need to Know

For crypto investors in India, the rules around losses are quite restrictive. Under Section 115BBH, losses from Virtual Digital Assets (VDAs) come with no tax relief. Here’s what that means:

No Set-Off Allowed:
You cannot offset a loss from one cryptocurrency against gains from another, nor can you set off crypto losses against any other type of income.
No Carry-Forward of Losses:
Crypto losses cannot be carried forward to future financial years.
No Deduction for Expenses:
Expenses related to crypto transactions—such as network fees, gas fees, or exchange charges—cannot be claimed as deductions.
Only Cost of Acquisition Allowed:
The only permissible deduction is the cost of acquisition, i.e., the original purchase price of the asset.

These rules mean Indian investors must carefully track their gains and losses, as losses won’t reduce their tax liability.

Is Any Crypto Tax-Free in India?

Not every crypto-related activity incurs tax in India. Here are situations where no tax applies:

Tax-Free Crypto Transactions

HODLing: Simply holding cryptocurrency without selling, trading, or spending it is completely tax-free.
Transfers Between Your Own Wallets: Moving crypto between your personal wallets is not a taxable event, as ownership does not change.
Receiving Crypto as a Gift:
- Gifts from close family members are fully tax-exempt, regardless of value.
- Gifts worth up to ₹50,000 from friends or non-relatives in a financial year are also tax-free.

Lost or Stolen Crypto in India: Key Points

The Income Tax Department (ITD) has not issued explicit rules for lost or stolen crypto. However, based on Indian court precedents related to other assets:

You typically won’t owe tax on crypto that is lost due to fraud, hacking, or theft.
You also cannot claim or offset these losses against other crypto gains or taxable income, given the ITD’s strict stance on disallowing crypto loss deductions.

How to Calculate Crypto Tax in India

Crypto gains in India are taxed at a flat 30% rate. To calculate your tax liability, follow these steps:

1. Determine Your Cost Basis

Your cost basis is:

The amount you paid to purchase the crypto, or
The fair market value (FMV) in INR on the day you received it (for airdrops, gifts, mining, etc.)

Note:
The ITD does not allow adding transaction fees (e.g., gas fees, buy/sell fees) to the cost basis.

2. Calculate Your Profit

Profit = Sale Value (or FMV at disposal) − Cost Basis

Selling for INR: Subtract cost basis from the sale price.
Trading or Spending Crypto: Subtract cost basis from the FMV in INR on the transaction date.

Accepted Cost Basis Methods in India

FIFO (First In, First Out): First purchased units are considered sold first.
Average Cost Basis: Uses the average purchase price of all your holdings.

How Is Crypto Mining Taxed in India?

There is no specific ITD guidance yet, but mining income is likely treated as additional income:

Income Tax: You pay tax at your applicable slab rate based on the FMV of mined coins on the day you receive them.
Later Disposal: If you sell, swap, or spend these coins and earn a profit, that gain is taxed at 30%.

Because rules are still evolving, miners should consult a qualified tax professional.

How Is Crypto Staking Taxed in India?

Similar to mining, staking rewards are expected to be treated as additional income:

Income Tax: Pay tax at your slab rate based on the FMV of staking rewards on receipt.
On Disposal: Any profit from selling, swapping, or spending these rewards is taxed at 30%.

When Do I Need to Report Crypto Taxes in India?

India’s financial year runs from April 1 to March 31. Your crypto income must be reported in your annual Income Tax Return (ITR) by the standard due dates.

Filing Deadlines for FY 2023–24 (AY 2024–25)

July 31, 2024: For taxpayers not requiring an audit
October 31, 2024: For taxpayers whose accounts need auditing
December 31, 2024: Deadline for filing a belated return

How to File Your Crypto Tax?

For FY 2023–24 (AY 2024–25), use:

ITR-2 → If declaring crypto gains as capital gains
ITR-3 → If declaring crypto income as business income

Both forms include “Schedule VDA” for disclosing income from Virtual Digital Assets.

IndiaFilings experts can assist you with precise crypto gain calculations and smooth ITR filing—ensuring accuracy and compliance without the hassle.

About the Author

Vinod

Vinod is an experienced legal writer who simplifies complex legal concepts into clear, actionable insights. He helps entrepreneurs understand their legal responsibilities and build confident, compliant, and sustainable businesses.

February 1, 2026