Crypto Tax in India 2026: 30% Flat Tax, 1% TDS and How to File It

Published 28 July 2026 · Investing

Rohit made ₹80,000 trading Bitcoin and lost ₹50,000 on an altcoin in the same year. He assumed his taxable crypto profit was the net figure — ₹30,000. It isn't. Under Indian tax law, he owes 30% tax on the full ₹80,000 gain, and the ₹50,000 loss simply vanishes — it cannot reduce that bill by a single rupee.

Crypto tax in India is one of the strictest regimes in the world for a mainstream asset class. Here is exactly how it works, with no exceptions left out.

The Flat 30% Rule — No Slabs, No Exceptions

Under Section 115BBH, any gain from transferring a Virtual Digital Asset (VDA) — Bitcoin, Ethereum, any other cryptocurrency, and NFTs — is taxed at a flat 30%, plus 4% health and education cess, for an effective rate of 31.2%. This applies no matter what your total income is. A person in the ₹5L income bracket and a person in the ₹50L bracket pay the exact same 31.2% on crypto gains — your regular income tax slab is irrelevant here.

No deduction is allowed against this gain except the cost of acquiring the asset. Trading fees, exchange charges, electricity costs for mining, and internet bills — none of it is deductible. If you bought ₹1L of a token and sold it for ₹1.6L, your taxable gain is ₹60,000, not ₹60,000 minus whatever you spent on trading platform fees.

The Rule That Catches Almost Everyone: No Loss Set-Off

This is the single most misunderstood part of crypto tax in India. A loss on one crypto asset cannot be set off against a gain on another crypto asset — even though both are VDAs, even though both sit in the same exchange wallet. Rohit's ₹50,000 altcoin loss cannot reduce his ₹80,000 Bitcoin gain. He owes 31.2% on the full ₹80,000.

It gets stricter still: a crypto loss also cannot be set off against any other income — salary, rent, capital gains from stocks, anything. And unlike stock market losses, crypto losses cannot be carried forward to future years either. If you don't have a gain to absorb it in the same year, the loss is simply gone.

Each transaction is also assessed independently. You cannot pool all your crypto trades for the year and net them against each other — every individual sale where you made a profit is taxed at 31.2% on that specific gain, and every sale at a loss provides zero tax benefit.

The 1% TDS on Every Trade

Under Section 194S, a 1% TDS applies to crypto transactions once your total transactions with a given deductor cross ₹10,000 in a financial year (₹50,000 for certain specified categories of buyers). On an Indian exchange, the exchange itself deducts and deposits this TDS automatically before crediting you — you'll see it reflected in your trade statement. In peer-to-peer transactions, the buyer is technically responsible for deducting and depositing the TDS.

This 1% TDS is not an additional tax — it's an advance credit against your final 30% liability, similar to TDS on salary. It shows up in your Form 26AS / AIS and gets adjusted when you file your return.

Where to Declare It in Your ITR

Every VDA transaction must be reported in Schedule VDA, transaction by transaction — not as a single net figure. This schedule is available in ITR-2 (if you have no business income) or ITR-3 (if you do). ITR-1 and ITR-4 cannot be used if you have any VDA income, regardless of how small the gain.

If your total tax liability for the year — including crypto gains — exceeds ₹10,000 after TDS, you're also required to pay advance tax in quarterly instalments, not just settle up at ITR filing time. Crypto traders who assume the 1% TDS "handles it" are often surprised by a Section 234C penalty for underpaying advance tax during the year.

What Most People Get Wrong

"I only owe tax if I convert crypto back to rupees." Not true. Trading one cryptocurrency for another — say, Bitcoin for Ethereum — is itself a taxable transfer of a VDA. You owe 30% tax on the gain at the moment of that swap, even if you never touched a bank account.

"Foreign exchange trades aren't tracked by Indian tax authorities." The 1% TDS mechanism was specifically designed to create a data trail even for transactions the department wouldn't otherwise see, and international exchanges increasingly share data under global information-exchange agreements. Undeclared crypto income is treated the same as any other undisclosed income if discovered later — with penalties well beyond the original 31.2%.

Frequently Asked Questions

What is the tax rate on crypto gains in India?

A flat 30% under Section 115BBH, plus 4% health and education cess, for an effective rate of 31.2%. This applies regardless of your income tax slab and regardless of how long you held the asset — there is no separate short-term or long-term rate for crypto.

Can I offset crypto losses against crypto gains?

No. A loss on one virtual digital asset cannot be set off against a gain on another VDA, cannot be set off against any other type of income, and cannot be carried forward to future years. Each transaction's gain is taxed independently.

How does the 1% TDS on crypto work?

Under Section 194S, 1% TDS is deducted on crypto transactions once your cumulative transactions with a deductor exceed ₹10,000 in a financial year. Indian exchanges deduct this automatically; it appears as a credit in your Form 26AS/AIS and is adjusted against your final 30% tax liability at filing time.

Is swapping one cryptocurrency for another a taxable event?

Yes. Any transfer of a VDA — including trading one crypto for another, not just converting to rupees — is a taxable event. The gain is calculated based on the fair market value at the time of the swap, and 30% tax applies on any profit.

Which ITR form do I use to declare crypto income?

ITR-2 if you have no business income, or ITR-3 if you do. Both include Schedule VDA, where every transaction must be listed individually. ITR-1 and ITR-4 do not support VDA income and cannot be used if you have any crypto gains to declare, however small.

Have you actually pulled a full transaction export from your exchange this year, or are you estimating your crypto gains from memory?