Cryptocurrency & VDA Taxation in India: 30% Tax, 1% TDS & ITR Reporting Guide

What counts as a "Virtual Digital Asset" (VDA)?

The Finance Act 2022 inserted a specific definition of Virtual Digital Asset into the Income-tax Act. A VDA broadly covers:

Use the ITR Form Selector — AY 2026–27 to apply these points to your figures or facts.

• Cryptocurrencies such as Bitcoin, Ethereum, and other tokens traded on exchanges
• Non-Fungible Tokens (NFTs)
• Any other digital asset notified by the Central Government

Once an asset falls under this definition, income from its transfer is taxed under a separate, self-contained scheme — Section 115BBH — that overrides the normal capital gains and business income provisions for that income.

The flat 30% tax under Section 115BBH

Any income arising from the transfer of a VDA is taxed at a flat 30%, plus applicable surcharge and 4% health and education cess — irrespective of:

For the connected rule, example or next step, see Rental Income for NRIs: NRO, TDS and ITR Checklist.

• Your total income or which income tax slab you fall in
• Whether the gain is "short-term" or "long-term" — there is no holding-period distinction for VDAs
• Whether you are an individual investor, trader, or running a business in crypto

This means even someone with zero other taxable income still pays 30% on crypto gains — the basic exemption limit and slab benefits do not apply to VDA income.

How "income" from a VDA is computed

Income = Sale consideration − Cost of acquisition. Two important restrictions apply:

• No deduction for any expense other than the cost of acquisition — exchange fees, internet costs, advisory fees, electricity for mining, etc. are not deductible.
• No deduction under Chapter VI-A — deductions like Section 80C, 80D etc. cannot be claimed against VDA income.

No set-off or carry-forward of crypto losses

This is the rule that catches most investors off guard:

• A loss from transferring one VDA cannot be set off against gains from another VDA (e.g., a loss on Ethereum cannot reduce a gain on Bitcoin).
• VDA losses cannot be set off against any other head of income — salary, business income, capital gains from shares, etc.
• Unutilised VDA losses cannot be carried forward to future years at all.

Each VDA-to-VDA or VDA-to-INR transaction is, in effect, taxed on a standalone basis — gains are taxed in full, while losses simply disappear for tax purposes.

1% TDS under Section 194S

Section 194S requires a 1% TDS to be deducted on payment for transfer of a VDA, where the aggregate value of transactions exceeds the specified threshold in a financial year (₹50,000 for specified persons such as individuals/HUFs not subject to audit, and ₹10,000 for others).

TDS deducted under Section 194S is reflected in Form 26AS and can be claimed as a credit against your final tax liability — it does not change the 30% rate, it is only an advance collection mechanism.

Reporting crypto income in your ITR — Schedule VDA

From AY 2023-24 onwards, ITR forms include a dedicated Schedule VDA where you must report each transfer of a virtual digital asset separately, including:

• Date of acquisition and date of transfer
• Head under which income is to be taxed (this is computed automatically at 30% under 115BBH)
• Cost of acquisition and sale consideration for each transaction
• Income from transfer of VDA

Depending on the nature and frequency of your activity, you will typically use ITR-2 (capital-gains-style holding) or ITR-3 (if treated as business income from trading). Even gifts of VDAs above ₹50,000 in value from non-relatives are taxable in the recipient's hands under "Income from Other Sources."

Worked Example: One Profitable Trade, One Loss

In FY 2026-27, an investor buys Bitcoin for ₹2,00,000 and later sells it for ₹3,00,000 on an Indian exchange — a gain of ₹1,00,000, taxed in full at 30% = ₹30,000 (before surcharge/cess), with the exchange also deducting 1% TDS = ₹3,000 at the time of sale, credited in Form 26AS against the final liability. The same investor also sells Ethereum at a ₹40,000 loss. That ₹40,000 loss cannot reduce the ₹1,00,000 Bitcoin gain, cannot offset salary or any other income, and cannot be carried forward — the investor still owes 30% tax on the full ₹1,00,000 Bitcoin gain, with the Ethereum loss providing no tax benefit at all.

GST on crypto trading and other practical points

• Gains must be reported even if the crypto was converted to another crypto and never withdrawn to INR — every VDA-to-VDA swap is a taxable transfer.
• Surcharge applies based on total income slabs (up to 37% under old regime for very high incomes), pushing the effective rate above 30% plus cess for high earners.
• Receiving crypto as payment for goods/services (e.g., freelancing) is taxed as business/professional income at slab rates first, and any subsequent transfer of that crypto is separately taxed at 30% under 115BBH on the gain from that point.
• Non-disclosure of crypto income can attract penalties and scrutiny, as exchanges report transaction data to the tax department.