By Nitesh
- Section 115BBH taxes gains on virtual digital assets at a flat 30%, plus surcharge and a 4% cess, so the effective rate is higher.
- Section 194S deducts 1% TDS at the point of transfer, whether or not you made a profit.
- No loss set-off. Losses cannot offset gains from other assets, other income, or in most readings even other crypto trades.
- TDS thresholds are ₹50,000 a year for most individuals and ₹10,000 for everyone else.
India crypto tax is unusual because it is simultaneously very clear and very unfinished. The rates are unambiguous and have been in force since 2022. What is missing is everything around them: no custody framework, no single regulator, and no resolution on how virtual digital assets should be treated as a category.
This guide covers the part that is settled, which is what you owe and when. It is not tax advice, and a chartered accountant should see your actual numbers before you file.
What counts as a virtual digital asset?
The Income Tax Act defines a virtual digital asset broadly. Cryptocurrencies, NFTs, and tokens generated through cryptographic means all sit inside it. If you are new to the underlying technology, our explainer on what cryptocurrency actually is covers the ground beneath this.
The breadth is deliberate. The India crypto tax framework was written to capture the asset class without waiting for a settled definition of what these assets legally are. That is why they are taxable but still not clearly regulated.
How does the India crypto tax 30% rate actually work?
Section 115BBH applies a flat 30% to income from transferring a virtual digital asset. Flat means flat: your slab rate is irrelevant, and someone in the 5% bracket pays the same 30% as someone in the 30% bracket.
On top sits the applicable surcharge, which scales with total income and can add 10% to 25% or more, plus a 4% health and education cess. The effective India crypto tax rate for a high earner therefore lands meaningfully above 30%.
Only one deduction is permitted: the cost of acquisition. Not exchange fees, not gas, not the cost of your hardware wallet, not interest on money you borrowed to buy. Buy at ₹100,000, sell at ₹150,000, and you are taxed on ₹50,000 regardless of what the transaction cost you.
Why can you not offset losses?
Because the statute says so, and this is the provision that surprises people most.
No deduction in respect of any expenditure (other than cost of acquisition) or allowance shall be allowed, and no set off of any loss shall be allowed.
That is the operative language of Section 115BBH, and it is doing a great deal of work in two clauses.
A loss on a virtual digital asset cannot be set off against gains from equity, property, salary or business income. It cannot be carried forward to future years. And on the department’s reading, a loss on one virtual digital asset cannot be set off against a gain on another.
The practical effect: lose ₹1,00,000 on one token and gain ₹1,00,000 on another in the same year, and you are flat overall but still owe 30% on the gain. The India crypto tax treatment taxes each profitable disposal in isolation.
What is the 1% TDS, and who deducts it?
Section 194S requires 1% to be withheld at the point of transfer. It is not an extra tax. It is an advance against the 30% you will eventually owe, and it is credited when you file.
The mechanics differ by venue. On an Indian exchange, the exchange deducts and deposits it, and you see it in Form 26AS. In a peer-to-peer or wallet-to-wallet transfer, the buyer is responsible, and the deposit is made using Form 26QE.
The uncomfortable part is that TDS applies to the transfer, not the profit. Sell at a loss and 1% is still withheld. For anyone trading frequently, this becomes a working-capital problem: a real fraction of your balance sits with the government until you file and claim it back.
What are the TDS thresholds?
Two, and which applies depends on who you are.
₹50,000 per financial year for specified persons, meaning individuals and HUFs whose accounts do not require audit. That covers most retail traders.
₹10,000 per financial year for everyone else, including businesses above the audit threshold and companies.
Below the threshold, no TDS. Above it, 1% applies to transfers. The threshold affects withholding only. The 30% liability under the India crypto tax rules exists from the first rupee of gain.
How do you report it at filing time?
Through Schedule VDA in your income tax return, which asks for each transaction: date of acquisition, date of transfer, cost, and consideration received.
Two things people miss. Foreign holdings must also be disclosed in Schedule FA regardless of value, so assets on an offshore exchange are reportable even if you never sold. And your own records should be reconciled against exchange statements before filing, because Schedule VDA is transaction-level and mismatches are visible.
India crypto tax filings are transaction-level, so keep acquisition dates and costs for everything. Since the only permitted deduction is cost of acquisition, a missing cost basis means being taxed on the full sale value.
What is still undecided in India crypto tax policy?
Nearly everything except the rates.
There is no single regulator. The working split under discussion places SEBI over tokens behaving like securities, the RBI over cross-border flows, and the Finance Ministry over tax. The 36th Report on the Securities Markets Code, tabled on 23 July, recommended an interim framework operated through self-regulatory organisations.
There is also no custody framework, which is why domestic funds and advisers cannot easily hold an asset the state will nonetheless tax. As TechToken reported when the SEC sent its custody rewrite to the White House, India’s Standing Committee on Finance cancelled the hearing where the Finance Ministry was due to give evidence on virtual digital assets two days later, with no replacement date.
TechToken Take
The India crypto tax design does something specific: it makes holding cheap and trading expensive.
The India crypto tax rate of thirty percent with no loss offset and 1% withheld on every transfer punishes frequency. Two traders with identical year-end positions pay very differently depending on how often they moved. That pushes serious participants toward buy-and-hold, or offshore, or into structures that never touch an Indian exchange.
It also explains why Indian institutional exposure keeps routing through US-regulated vehicles under the Liberalised Remittance Scheme rather than domestic products. There is no domestic product, because there is no custody rule to build one against. The tax code recognises the asset. The regulatory framework does not. Until that gap closes, the India crypto tax regime will keep collecting revenue from an asset class it has not agreed to legitimise.
What to watch
Whether the Standing Committee on Finance reschedules the Department of Economic Affairs hearing before the winter session, and whether the DEA discussion paper is published at all after reportedly being shelved five times since May 2025.
Whether any Budget revisits the loss set-off prohibition. It is the provision the industry has lobbied hardest against, and the one with the clearest argument behind it.
And whether a custody framework arrives from SEBI or the RBI. That, not the rate, is what determines whether a compliant Indian crypto product can exist. Current filing rules are published on the Income Tax Department portal, and the statutory text sits with the Central Board of Direct Taxes.
What's your reaction?
