Crypto Income Tax
Planning in India
30% flat tax, 1% TDS, no loss set-off, Schedule VDA reporting — everything crypto investors in India must know to stay compliant and minimise tax exposure.
India’s Crypto Tax Framework — The Basics
India introduced a comprehensive Virtual Digital Asset (VDA) tax framework in the Union Budget 2022, effective from FY 2022-23. The framework classifies all cryptocurrencies, NFTs, and other digital tokens as VDAs and subjects them to a 30% flat tax on gains, a 1% TDS on transactions, and strict loss set-off restrictions. These rules remain in force as of FY 2025-26.
Understanding this framework is essential for every crypto holder in India — not just active traders. Even holding Bitcoin that you bought years ago and sell today is subject to these rules.
Key VDA Tax Rules at a Glance
| Rule | Details |
|---|---|
| Tax Rate on Gains | 30% flat (plus 4% cess = 31.2% effective) |
| Applicable Section | Section 115BBH |
| Holding Period Impact | None — 30% applies regardless of how long held |
| Deductions Allowed | Only cost of acquisition; no other deduction |
| Loss Set-Off | Not allowed against any income; not allowed across VDAs |
| Loss Carry-Forward | Not permitted |
| TDS on Sales | 1% under Section 194S (on transactions above Rs 10,000) |
| ITR Form Required | ITR-2 or ITR-3 (Schedule VDA) |
| Staking / Mining / Airdrops | Taxable at 30% (or slab rate if received as income) |
What Triggers a Taxable Crypto Event in India
Many crypto holders are unaware that multiple types of transactions trigger tax liability, not just selling crypto for INR:
- Selling crypto for INR: Most obvious taxable event — gain = sale price minus cost of acquisition
- Crypto-to-crypto swap: Trading Bitcoin for Ethereum is a taxable disposal of Bitcoin at its fair market value at the time of swap
- Using crypto to buy goods or services: Treated as disposal of crypto at current value — taxable gain on any appreciation
- Receiving staking rewards: Taxable as income at FMV on date of receipt at 30%
- Mining income: Taxable as income at FMV on date of receipt
- Receiving airdrops: If received without consideration, FMV at receipt is income; subsequent sale gain is also taxable
- Gifting crypto: Taxable for recipient if received from non-relatives above Rs 50,000; taxable for giver if sold/transferred
Not a taxable event: Transferring crypto between your own wallets (same owner), buying crypto with INR (no gain yet), holding crypto.
The 1% TDS — How It Works in Practice
Every time you sell crypto on an Indian exchange, the exchange deducts 1% TDS from your sale proceeds before crediting you. Example: sell Rs 1,00,000 worth of Bitcoin — exchange credits you Rs 99,000 and deposits Rs 1,000 as TDS with the government under your PAN.
This TDS accumulates across all your crypto sales during the year. When you file your ITR, the total TDS deducted appears in Form 26AS and AIS. You claim it as a credit against your total tax liability. If your total crypto gains for the year result in lower tax than TDS deducted, you are eligible for a refund.
Foreign exchange caution: If you trade on Binance, Coinbase, or other foreign exchanges, 1% TDS is NOT deducted. You must self-pay the full 30% tax on gains and 1% TDS equivalent when filing ITR. The Income Tax Department’s AIS now tracks foreign exchange transactions through bank transfers.
Calculating Crypto Gains — Cost of Acquisition Rules
The only deduction allowed from crypto sale proceeds is the cost of acquisition. Rules:
- Direct purchase: Cost = amount paid in INR (including exchange fees paid at time of purchase — exchange fees at sale are not deductible)
- Crypto received as gift: Cost = FMV on date of gift (or donor’s cost, whichever is applicable)
- Mined crypto: Cost = FMV on date of mining (used as income at receipt; becomes cost basis for future sale)
- Airdropped tokens: Cost = FMV on date of receipt (used as income; becomes cost basis)
- Crypto-to-crypto swap: Cost basis of received crypto = FMV at time of swap
Maintain detailed records of every transaction: date, quantity, price in INR, and exchange or wallet involved. Most Indian exchanges allow CSV export of trade history — download and archive this annually.
ITR Reporting — Schedule VDA
Crypto income must be reported in Schedule VDA, introduced in ITR forms from AY 2023-24. You cannot use ITR-1 (Sahaj) if you have any VDA transactions — use ITR-2 (if no business income) or ITR-3 (if business income or trading in crypto).
For each VDA category (Bitcoin, Ethereum, etc.), report:
- Total proceeds from sale during the year
- Cost of acquisition of units sold
- Net gain or loss (loss is non-deductible but still required to be reported)
- Tax at 30% on net gain
Staking, mining, and airdrop income is reported under the appropriate income head (business income or income from other sources) at FMV on date of receipt.
Advance Tax Planning for Crypto Traders
Active crypto traders with significant gains must pay advance tax quarterly to avoid interest penalties:
| Quarter | Due Date | Cumulative Tax to Pay |
|---|---|---|
| Q1 | June 15 | 15% of estimated annual tax |
| Q2 | September 15 | 45% of estimated annual tax |
| Q3 | December 15 | 75% of estimated annual tax |
| Q4 | March 15 | 100% of estimated annual tax |
Since crypto markets are volatile, estimate gains conservatively and top up advance tax in Q3 and Q4 based on actual realised gains. The 1% TDS deducted by exchanges counts towards advance tax payments.
Compliance Checklist for Crypto Investors in India
- Download trade history from all exchanges (Indian and foreign) at year-end
- Calculate gains on each disposal using FIFO or specific identification method (document your method consistently)
- Do not net losses against gains across different coins — report each gain separately
- File ITR-2 or ITR-3 with Schedule VDA — never ITR-1 if you have crypto transactions
- Verify TDS credits in Form 26AS and AIS match exchange-provided TDS certificates
- Pay advance tax quarterly if estimated annual crypto tax exceeds Rs 10,000
- Keep all transaction records for at least 7 years (ITR assessment window)
- Report foreign exchange holdings in Schedule FA of ITR if applicable
🧮 Free Calculators — Use Them Now
No login required. Updated for FY 2025-26.
Frequently Asked Questions
From FY 2022-23 onwards, all income from Virtual Digital Assets (VDAs) including cryptocurrency and NFTs is taxed at a flat 30% under Section 115BBH of the Income Tax Act, regardless of holding period or the investor’s income tax slab. An additional 4% health and education cess applies, making the effective rate 31.2%. No deduction for expenses (other than cost of acquisition) or losses from other sources is allowed against crypto gains. This 30% rate applies to gains from crypto trading, staking rewards, mining income, and airdrop receipts treated as income.
Section 194S mandates that 1% TDS (Tax Deducted at Source) is deducted on every cryptocurrency sale transaction above Rs 10,000 (Rs 50,000 for small traders with annual trading below Rs 1 crore). Crypto exchanges registered in India (WazirX, CoinDCX, Zebpay) deduct this TDS before crediting sale proceeds. The TDS is not a final tax but a credit against your total tax liability for the year. You claim it in your ITR. TDS deducted by Indian exchanges appears in your Form 26AS and AIS. Transactions on foreign exchanges may not have TDS deducted — you must self-pay the tax.
No. Under the current VDA tax regime, losses from Virtual Digital Assets cannot be set off against any other income (salary, business income, other capital gains). Losses from one VDA cannot even be set off against gains from another VDA within the same financial year. Further, VDA losses cannot be carried forward to future years. This is one of the harshest aspects of the Indian crypto tax regime. It means that if you sell Bitcoin at a loss and Ethereum at a profit in the same year, you pay 30% on the Ethereum gain while getting zero benefit from the Bitcoin loss.
Crypto income is reported in ITR-2 or ITR-3 (not ITR-1) under Schedule VDA (Virtual Digital Assets), introduced from AY 2023-24. For each VDA transaction, you must report: date of acquisition, date of transfer, cost of acquisition, sale consideration, and gain or loss. Staking rewards and mining income are reported as income from other sources at 30% in the year of receipt. Airdropped tokens are taxed on receipt at fair market value. Keep detailed transaction records from all exchanges (trade history exports) and wallets for each financial year. The penalty for non-reporting can be 200% of unpaid tax plus prosecution in serious cases.
Yes. Cryptocurrency or any VDA received as salary, for services rendered, or as business income is taxable in the year of receipt at the fair market value on the date of receipt, at your applicable income tax slab rate (not the flat 30% VDA rate). When you subsequently sell those VDAs, any gain above the fair market value used for income tax is taxed at 30% under Section 115BBH. This creates a double taxation scenario for employees and freelancers paid in crypto: you pay slab-rate tax on receipt, then 30% on any appreciation when you sell.
Yes. If your total estimated tax liability for the year (including crypto gains) exceeds Rs 10,000, you must pay advance tax in quarterly instalments. Since crypto gains can be large and irregular, estimate your gains mid-year and pay advance tax by September 15 (45% of estimated total tax) and December 15 (75%) to avoid interest under Section 234C. Interest at 1% per month applies on shortfall in each instalment. Crypto traders with frequent transactions should track gains monthly and use the Advance Tax Calculator to estimate quarterly payments.