If you have ever sold Bitcoin or Ethereum on an Indian exchange, you may have noticed less money landing in your account than you expected. That is TDS at work. And plenty of investors only find out at filing time that they owe tax even when they ended the year at a net loss.
This guide walks through how crypto tax works in India, using simple examples you can check against your own trades.
Updated October 2026. Budget 2026 left the tax rate unchanged but tightened reporting.
The three rules that matter most
Indian tax law calls crypto and NFTs Virtual Digital Assets (VDAs). Three rules apply to them:
| Rule | What it means |
|---|---|
| Flat 30% tax (Section 115BBH) | Gains from transferring a VDA are taxed at 30%, plus 4% cess and any applicable surcharge |
| 1% TDS (Section 194S) | Tax is deducted at source on transfers above the threshold |
| No loss set-off | A VDA loss cannot be set off against any other income, not even gains on another coin, and cannot be carried forward |
The 30% rate applies whether you held for one day or five years, and regardless of your income slab. The only deduction allowed is the cost of acquisition. Internet bills, electricity, trading tools and similar costs do not count.
Note: Under the new Income-tax Act, 2025, section numbers have changed (115BBH moves to Section 194, 194S to Section 393), but the rates and rules carry over.
Example 1: A simple profit
You buy Bitcoin for ₹1,00,000 and sell it for ₹1,50,000.
- Profit: ₹50,000
- Tax at 30%: ₹15,000
- Cess at 4%: ₹600
- Total tax: ₹15,600
When you sold, the exchange would have deducted 1% TDS on ₹1,50,000, which is ₹1,500. This is not an extra tax. It is credited against your final bill, so you would pay roughly ₹14,100 more while filing your return.
Example 2: The loss trap
Suppose in one year:
- Coin A: ₹50,000 profit
- Coin B: ₹30,000 loss
Many people assume they will be taxed on ₹20,000. They are not. Tax is calculated on the full ₹50,000, because Coin B’s loss cannot be adjusted against Coin A’s gain. You can end up paying tax on more than your real profit. This is also why the usual year-end trick of booking losses to cut your tax bill does not work for crypto in India.
How the 1% TDS works
- The threshold is ₹10,000 per year for most individuals, and ₹50,000 for certain specified persons.
- Crypto-to-crypto swaps count as transfers, so TDS can apply to them too.
- TDS is an advance payment of your tax, not an additional charge. Check it in your Form 26AS or AIS and claim it in your return.
How to report crypto in your ITR
- Report your crypto income in Schedule VDA (available in ITR-2 and ITR-3).
- Keep a record of every transaction: date, buy price and sell price.
- Download statements from every exchange you use. One platform’s data is rarely the full picture.
- If you hold crypto on a foreign platform, it also goes in Schedule FA.
- Match your TDS entries against your AIS before filing.
A newer rule worth knowing
From 1 April 2026, Indian platforms report user crypto transactions directly to the tax department under Section 285BAA. The assumption that nobody will notice no longer holds, and accurate reporting is the only safe route.
Common mistakes
- Assuming small profits are tax-free
- Subtracting losses from gains
- Treating a wallet-to-wallet transfer as the same thing as a sale
- Relying on a single exchange’s records
- Assuming that once TDS is deducted, there is nothing left to pay
FAQs
Is holding crypto taxed? Generally no. Tax arises when you sell or transfer it.
Are staking rewards and airdrops taxed differently? The rules here are more nuanced. Rewards are generally treated as income when received, and a later sale is taxed again at 30% on any further gain. Confirm your case with a chartered accountant.
Is the 1% TDS an extra 1% tax? No. It adjusts against your total tax liability.
Disclaimer: This article is for information only and is not tax advice. Rules can change, so check incometax.gov.in or consult a CA before filing.
