Cryptocurrency Tax in India: The Complete 2026 Guide
Since 2022 India's crypto tax regime has been unusual and strict: a flat, high rate with almost no deductions. Taxing crypto properly requires careful record-keeping because the burden is on you to prove your transactions. This guide walks through every layer - the 30% rule, TDS, what counts as a taxable event, how to compute it, and the practical records to keep.
The 30% + 4% Rule
Gains from transferring any virtual digital asset (VDA) - which includes Bitcoin, Ethereum, most altcoins, NFTs, and tokens - are taxed at a flat 30% plus 4% cess, with no deductions except the cost of acquisition itself. No exemption limit, no indexation, and no set-off of crypto losses against other income. That last point is the one that surprises people: you cannot use crypto losses to reduce other taxable income.
What Counts as a Taxable Event
- Crypto-to-fiat sale (INR withdrawal or conversion)
- Crypto-to-crypto trades (BTC to ETH) - each is a "transfer" taxed on the gain
- Crypto-to-goods/services purchase
- Gifting crypto (subject to specific clauses)
- Mining and staking received coins (attracted as income when received)
- Derivatives and options on crypto (taxed the same flat rate under the VDA provisions)
Not taxable: holding, transferring between your own wallets, and (with caveats) transfers where no gain occurs under gift rules.
The 1% TDS
A 1% TDS applies on crypto transfers above a threshold for a specified person. The exchange deducts it at source and credits it against your final tax. File with your income tax return and reconcile TDS amounts against your broker's Form 16A/26AS to avoid mismatches and scrutiny.
Computing Gains: Cost Basis Matters
Gain = sale value - cost of acquisition. For crypto acquired over months of DCA buying, your basis per unit is the weighted average or FIFO of your buys. Broker records plus your own ledger make this auditable. Gains on crypto derivatives are computed on the premium/profit, taxed at the same flat rate with no deduction of brokerage or other expenses beyond documented cost.
Record-Keeping You Should Maintain
- Buy date, exchanged asset, quantity, price, fee
- Sell date, proceeds, quantity, fee, TDS deducted
- Wallet addresses for transfers (to prove self-transfer, not a taxable event)
- Screenshots of the relevant page at the time of each transaction
A simple CSV (date, side, asset, qty, price, fee, counterparty) exported from your exchange plus wallet logs is enough for a competent CA to file cleanly.
Reporting in Your ITR
Report crypto gains under the "income from virtual digital assets" schedule (Schedule VDA) in the ITR form. Any TDS claimed must match 26AS. If you trade heavily, engagement of a CA familiar with VDAs is worth the fee: the flat-rate rules are simple but unforgiving, and errors attract notice.
The Consequences of Getting It Wrong
Under-reporting shows up in exchange data sharing and bank statements; the trailing mismatch triggers notices, interest at prevailing rates, and penalties that can outweigh the tax. Conversely, over-paying because you didn't track basis costs is common. Discipline with records is cheaper than either error.
SEBI Disclaimer
This article is educational and is not tax or investment advice. Cryptocurrency taxation in India is complex and evolving; consult a qualified chartered accountant for your specific situation.
The 30 Percent Plus Cess Weighing Down Gains
Under the current Indian regime, income from the transfer of a virtual digital asset faces a flat 30 percent plus the applicable 4 percent cess, effectively 31.2 percent, with no deduction beyond the cost of acquisition. This applies to crypto profits regardless of holding period, which collapses the "long-term = cheaper" logic that equity investors take for granted. The arithmetic is unforgiving: a trade set to earn 50,000 rupees in profit nets closer to 34,400 to 35,000 rupees after the levy, before considering TDS already withheld, so plan gains with the 31.2 percent wall in the middle of the spreadsheet.
The FIFO Cost Basis Question
Indian reporting expects the cost of acquisition computed per the FIFO method: the first units bought are the first units out when you sell. Because Indian exchanges can reconcile your per-coin cost across wallets, keep a ledger that tracks buy dates, buy prices, quantities, and the running average or FIFO layer of every coin you hold. A sell of a coin bought at 2 lakh rupees when another lot was bought at 5 lakh rupees is a tax outcome on 3 lakh rupees of gain; the ledger decides which line the Revenue Commissioner sees.
Gifts, Airdrops, and Mining Rewards
The net-leading rule is that receiving a crypto asset, whether as a gift, an airdrop, a staking reward, or a mining payout, creates a taxable event at its fair market value on receipt, and selling it later attracts the same VDA treatment on the difference. Keep a scraper or manual record of the value on receipt dates, because those entry values are the cost basis for the eventual transfer. Gifts above the specified threshold to a relative carry their own recipient-side rules; document gifts with the date and value while the paper trail is still soft and readable.
The 1% TDS and Its Refund Mechanics
When you sell crypto on a compliant Venue, 1 percent of the consideration is withheld as TDS under Section 194S and reflects in your Form 26AS. For a trader whose total VDA income sits within the basic exemption or whose advance-tax position is otherwise covered, that withheld amount can be claimed as a refund when the income tax return is filed; the effective cash flow loss of the 1 percent is temporary to the Revenue. Reconcile the 26AS entries against the exchange statement monthly, because a missing TDS line means the venue did not deposit it and your refund dispute inherits the delay.
Losses: The Rule Nobody Likes
The unlovable part of the crypto tax code is that losses on VDA transfers cannot be set off against income from any other head, nor carried forward. A trader who booked 2 lakh rupees of crypto losses in one year and 3 lakh of crypto gains the next pays tax on the full 3 lakh with no loss carry-in to shelter it. The consequence is structural: size the positions so that loss years are survivable cash-flow years, because the tax authority will not share the pain. Model the worst case - a loss year followed by a recovery year - in every annual projection.
An ITR Reporting Walkthrough
Report crypto gains under Schedule on the income tax forms through the capital gains or income from other sources head depending on characterisation, attach the reconciliation of your ledger to the exchange statements, and keep the export of every trade available for the seven-plus-year window the department audits. Practically: file the trade register as a supporting tab, keep exchange CSVs named by financial year, and let the ledger be the single source of truth. The entire exercise is best done continuously, because reconstructing a year of DeFi swaps from screenshots in July is the most expensive of all hobbies.
- Model the 31.2 percent effective rate in every gain plan.
- Maintain a FIFO cost ledger for each coin.
- Record receipt-date values for gifts, airdrops, and rewards.
- Reconcile 26AS TDS entries against exchange statements monthly.
- Keep loss-year and recovery-year cash flow separate in planning.
