Crypto tax in India: 30 percent tax and 1 percent TDS explained

In India, income from transferring any virtual digital asset (crypto, NFT or similar token) is taxed at a flat 30 percent, plus surcharge if applicable and 4 percent cess. The only deduction is the cost of acquisition, and losses cannot be set off or carried forward. Separately, 1 percent TDS is deducted on the sale value, which is only an advance and not the final tax.

The 30 percent rule in plain words

The rule applies to “any income from the transfer of any virtual digital asset”. It does not matter whether you hold coins for a day or five years, or whether you call yourself an investor or a trader. There is no long-term rate, no indexation and no slab benefit. A student with no other income pays the same 30 percent as a company director.

The definition of a virtual digital asset (VDA) is wide. It covers crypto tokens, NFTs and any blockchain-based crypto-asset. Currency, the RBI’s e-rupee, gift cards, reward points and subscriptions are excluded by notification. The definition now sits in section 2(111) of the Income-tax Act, 2025, which replaced section 2(47A) of the 1961 Act.

Two things are easy to miss. First, buying and holding is not a transfer, so tax arises only when you transfer. Second, a transfer does not need a rupee to reach your bank. Swapping Bitcoin for another token, or buying a phone with crypto, is a transfer, and the gain is calculated on the value you got in exchange.

A worked example with real numbers

Take Aman, a salaried software engineer in Noida. In June 2026 he buys Token X for ₹2,00,000. In February 2027 he sells it on an Indian exchange for ₹3,10,000.

1. Gain: ₹3,10,000 minus ₹2,00,000 = ₹1,10,000.
2. Tax at 30 percent: ₹33,000.
3. Cess at 4 percent of ₹33,000: ₹1,320. Total tax: ₹34,320.
4. TDS already deducted by the exchange at 1 percent of ₹3,10,000: ₹3,100.
5. Balance Aman must pay himself: ₹31,220, through advance tax or self-assessment tax before filing the return.

Now suppose Aman also bought Token Y for ₹90,000 and sold it for ₹40,000. He lost ₹50,000 in real life. For tax, that loss is ignored. He still pays tax on the full ₹1,10,000 gain from Token X. The loss cannot be adjusted against his salary, and it cannot be carried to next year either. This is the rule that surprises most people.

Whether a trading fee paid at the time of buying forms part of the cost of acquisition is not clearly settled. The fee on the sale side is certainly not deductible. A cautious approach is to take only the price paid as cost and to stay consistent every year, preferably after speaking to your chartered accountant.

How the 1 percent TDS works

TDS on VDA transfers is small, but its real job is to create a record that links your PAN to every sale. That record flows into your annual tax statement and your Annual Information Statement (AIS), and the department later matches it with your return.

• On an Indian exchange: the exchange deducts 1 percent from the seller’s consideration and deposits it. You will see it on your statement. A buyer on the exchange has nothing to deduct.
• In a direct or peer-to-peer deal: where the platform does not deduct, the buyer who pays a resident seller must deduct 1 percent once the yearly threshold is crossed, deposit it and file the TDS statement. Many individuals do not know this.
• No PAN: the rate rises to 20 percent.
• Thresholds: ₹50,000 a year for a “specified person” (broadly, an individual or HUF without business income, or with business turnover up to ₹1 crore or professional receipts up to ₹50 lakh), and ₹10,000 for other payers. Check the current TDS table with your CA if you are close to a limit.
• Swaps and payment in kind: where there is no cash to deduct from, the payer must still make sure the tax is paid. Two parties doing a direct swap should agree in writing who will deposit it.

Remember that TDS is deducted on the sale value, not the profit. If you sell at a loss, TDS is still cut, and you recover it as a refund by filing a return.

The new Income-tax Act, 2025: what changed and what did not

The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. The VDA rules were carried over in substance, but the section numbers changed. As on 7 November 2026, the position is as follows.

• Transfers up to 31 March 2026 are assessed under the old Act, so notices and forms for those years still say section 115BBH and section 194S.
• TDS on VDA transfers now appears in section 393(1), table serial 8(vi), with the same 1 percent rate and thresholds.
• The 30 percent charge, the successor to section 115BBH, is in section 194 of the 2025 Act, with the rate still at 30 percent.
• The Union Budget of 1 February 2026 kept the 30 percent rate and 1 percent TDS unchanged. It added penalties on exchanges and other reporting entities for failing to report crypto transactions (₹200 a day for non-filing and ₹50,000 for inaccurate information), which affects them and not ordinary users.

Your computation will look the same under both Acts. Only the references in forms and notices differ.

Common mistakes that cost money

• Taxing only the net profit. People net a winning coin against a losing coin. The law does not allow this.
• Ignoring swaps. Crypto to crypto trades are transfers. Reporting only rupee withdrawals under-reports income.
• Assuming TDS settles everything. One percent TDS rarely covers 30 percent tax.
• Missing advance tax. A large gain in October needs to be covered in the December and March instalments, or interest follows.
• Assuming foreign platforms are tax-free. Residents are taxed on worldwide income, and no Indian TDS may have been cut, so you must pay yourself.
• Weak records. Keep date, quantity, rupee cost and proof of payment for every purchase.

For the filing side, see our guide on how to report crypto in your ITR. For gifts, staking and NFTs, see the tax treatment of NFTs, airdrops, staking and gifted crypto.

Want the full set of worked examples and a tax worksheet? See the Crypto and VDA Law and Tax course or browse all certificate courses.

Frequently asked questions

Is crypto tax 30 percent on profit or on the whole sale amount?

On profit only, meaning sale consideration minus cost of acquisition. The 1 percent TDS is what is cut on the whole sale value.

Can I set off a crypto loss against salary or other crypto gains?

No. A VDA loss cannot be set off against any income, including gains on other VDAs, and cannot be carried forward.

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

No tax arises on merely holding. Tax arises when you transfer: sell, swap, spend or exchange.

Does 1 percent TDS apply to every trade on an exchange?

The exchange deducts it on the seller’s consideration, subject to the yearly thresholds. It also applies to sales made at a loss.

Is the 30 percent rate lower for long-term holding?

No. There is no long-term rate or indexation for VDAs.

Which section applies now, 115BBH or the new Act?

Section 115BBH for transfers up to 31 March 2026, and the corresponding provisions of the Income-tax Act, 2025 from 1 April 2026.

Quick quiz

Sources

• Income-tax Act, 1961: section 2(47A), section 115BBH, section 194S (transfers up to 31 March 2026)
• Income-tax Act, 2025: section 2(111), section 194 (VDA income at 30 percent), section 393(1) table serial 8(vi)
• Finance Act, 2022 (introduction of the VDA tax regime) and the Union Budget 2026 proposals on crypto-asset reporting penalties
• Income Tax Department guidance on taxation of virtual digital assets

This page is for education and general information, not legal advice for a specific case. Law as on 7 November 2026.