Crypto tax in India — the 1% TDS + 30% flat tax explained

Quick frame: India's crypto tax is intentionally punitive. Two sections kick in: 194-S deducts 1% TDS at every transfer (sale, swap, even crypto-to-crypto). 115BBH taxes profits at flat 30% (no expense deduction except cost). Losses can't be set off against any other income, can't be carried forward. Even a profitable trader after fees ends up paying ~32-33% effective rate. Casual traders are the biggest losers.

Two taxes in one trade

Sell ₹10 lakh of Bitcoin, original cost ₹6 lakh:

1. 194-S TDS at 1%: Exchange deducts ₹10,000 (1% of sale value) at transfer. You receive ₹9,90,000 net.
2. 115BBH tax at 30%: Gain = ₹4 lakh. Tax = ₹1.2 lakh. Plus 4% cess = ₹1.248 lakh.
3. The ₹10k TDS is a credit against your ITR liability — refundable if no liability.

Use the Crypto Tax Calculator to model your exact numbers.

What counts as a "Virtual Digital Asset"?

Section 2(47A) defines VDA broadly: cryptocurrency (Bitcoin, ETH), NFTs, tokens, smart contracts. Excludes: gift cards, digital rupees (e₹), reward points.

If your trade involves a VDA, both sections apply.

The crypto-to-crypto trap

If you swap ETH for BTC: it's treated as two transactions under section 2(47):

1. Sale of ETH at FMV (taxable)
2. Purchase of BTC (cost basis reset to FMV)

So even "rebalancing" portfolios triggers tax events. The exchange's INR equivalent at swap time is the FMV.

Why losses can't be offset

Section 115BBH(2) explicitly disallows: (a) set-off against any other income, (b) carry-forward to future years. So if you lose ₹2 lakh in 2025-26 and gain ₹3 lakh in 2026-27, you're still taxed on the full ₹3 lakh — the ₹2 lakh loss is gone.

This makes crypto less attractive than equities (which allow ₹1 lakh LTCG exemption + carry-forward of losses).

Specified persons — ₹50k threshold

For most users, 194-S triggers at ₹10k cumulative transfer per FY (per exchange). For "specified persons" (individuals / HUFs not under tax audit, gross receipts under ₹1 cr / ₹50L), threshold is ₹50,000 per FY.

Most retail traders qualify as specified persons.

What about staking / mining income?

Staking and mining are regular income at slab rate (not section 115BBH). When you later sell:

• Cost basis = FMV when you received the staking reward (already taxed at slab)
• Sale gain = sale price − cost basis (taxed at 30% under 115BBH)

So you're taxed at slab + 30% in two stages. Brutal.

Reporting in ITR

• ITR-2: report VDA gains under "Schedule VDA"
• ITR-3: same, but use schedule for business income too
• ITR-4: not eligible if you have VDA gains

The ITR Form Selector confirms.

Common questions

Q. Are P2P transactions also taxable? A. Yes. The buyer doesn't deduct TDS, but you owe the 30% gain tax. Under-reporting in P2P trades is a common audit trigger; the AIS now captures crypto activity.

Q. Is gift of crypto taxable? A. Receiver pays tax on FMV (under section 56(2)). Donor pays nothing. To "specified relatives", fully exempt.

Q. Holding for years — does that help? A. No. Unlike equities, there's no LTCG benefit for crypto. Hold for 1 year or 10 years — same 30% rate at sale.

Q. Can I claim mining electricity expense? A. Section 115BBH only allows cost of acquisition. Electricity, hardware depreciation, internet — none are deductible. Punitive.

Q. Tokens / NFTs — same rules? A. Yes. The definition of VDA is broad. Selling an NFT for profit triggers 1% TDS + 30% tax.

Q. Foreign exchange (Coinbase, Binance) — am I exempt? A. No. As a Resident Indian, your global income is taxed. Foreign exchanges don't deduct 194-S TDS, but you self-declare in ITR and pay 30% on gains.