Crypto Tax in India: 30% Rate, 1% TDS and Record-Keeping
1. Current position
India’s special tax regime for virtual digital assets continues to require careful year-specific application. Income-tax portal guidance describes the 30% special-rate framework plus applicable surcharge and cess, restrictions on deductions and loss set-off, and 1% withholding on covered transfers subject to thresholds and conditions. From 1 April 2026, use the Income-tax Act, 2025 forms and mapping for new-year events while preserving legacy treatment for earlier events.
2. How it works in practice
Each disposal—sale for rupees, swap for another token or purchase using a token—may create a taxable event. Exchange reports can omit off-platform transfers, wallet movements or cost basis. TDS is a tax credit, not the final tax liability, and it can create cash-flow mismatches for frequent traders.
A reliable decision separates the legal rule, the commercial contract and the actual cash flow. A regulatory permission does not guarantee suitability, and a product label does not override the substance of the transaction.
3. Key rules and measurement boundaries
| Item | Position | How to read it |
|---|---|---|
| Special rate | 30% plus applicable surcharge and cess | Apply to covered VDA income |
| Withholding | 1% TDS on covered transfer consideration | Threshold and payer process matter |
| Transition | New Act from 1 April 2026 | Use tax-year-specific forms and section mapping |
4. Practical example
A person buys a token for ₹2 lakh, sells it for ₹2.8 lakh and has ₹2,800 TDS reflected. The taxable gain is not simply the bank withdrawal. The ₹80,000 transfer result must be computed under the applicable VDA rules, with the TDS claimed as credit. A later loss on another token may not be freely set off against that gain.
5. Action checklist
- Export complete exchange and wallet histories.
- Classify transfers, swaps, airdrops and fees separately.
- Reconcile TDS credits with Form 26AS/AIS and payer records.
- Use the correct form for the event date and tax year.
- Preserve INR valuation methodology at each taxable event.
6. Evidence and document checklist
- Trade and order history.
- Wallet addresses and transaction hashes.
- INR value source and timestamp.
- TDS certificate/statement and AIS/26AS.
- Cost-basis and fee working.
7. Common mistakes
- Taxing only amounts withdrawn to a bank.
- Ignoring token-to-token swaps.
- Assuming all VDA losses can offset gains.
- Treating TDS as the final tax.
8. Red flags
- Exchange statement cannot reconcile to wallet balances.
- TDS deducted but not visible in tax records.
- Unexplained transfers to offshore wallets.
- Advice relies on an old section number without tax-year mapping.
9. Complaint or escalation route
Use the Income-tax portal grievance process for statement or form issues and obtain tax advice for classification, foreign-asset reporting, business income, mining, staking or cross-border transactions. Fraud complaints belong with the exchange, bank and cybercrime authorities.
10. FAQs
Is crypto taxed only when converted to rupees?
No. A transfer or swap can be taxable even without a bank withdrawal.
Can VDA losses be set off freely?
The special regime restricts deduction and loss set-off; apply the rule for the relevant tax year.
Is 1% TDS the final tax?
No. It is withholding credit; final liability is computed in the return.
Which form applies after 1 April 2026?
Use the portal’s new-Act form mapping for events under the Income-tax Act, 2025; earlier events may use legacy forms.
11. Official sources
- Income Tax Department — ITR-2 FAQs including VDA treatment
- Income Tax Department — TDS compliance
- Income Tax Department — New Act form mapping
Information date: 20 June 2026. Rates, thresholds, portal processes and live proceedings can change; use the linked official material for the transaction or filing date.