In India, cryptocurrency can be bought, held, and traded legally, but a higher tax is levied on it, and the reporting rules are stringent. Buying, selling, or swapping crypto carries penalties for mistakes.
In this blog, we explain crypto tax in India, what counts as a taxable event, how to report crypto in your return, what constitutes a change if you hold crypto abroad, and the penalties for non-compliance.
Crypto Tax in India: Procedure & Major Rules
According to the rules rolled out in 2022, crypto tax in India was introduced and still applies in 2026. Compared to other countries, cryptocurrency tax in India is much more stringent, and these three shape everything else.
1% TDS on Crypto
A 1% TDS applies to VDA transfers surpassing the prescribed threshold under Section 194S. This is not an additional tax. It is a prepayment adjustable against your final bill, and you claim credit for it when you file. Its other impact is that the tax department sees your transaction when it takes place.
Also Read: TDS Section 194I, 194IB & 194IC for TDS Under Income Tax Act
TDS on Cryptocurrency in India
| Facts | Details |
|---|---|
| Applicable TDS Section | Section 393 |
| Related Section Under IT Act, 1961 | Section 194S |
| TDS Rate | 1% of the sale consideration |
| TDS Deduction (Crypto Payment) | Individuals should deduct and deposit TDS with the Govt. |
| TDS Deduction (Cash Payment or any kind) | Individuals are required to deduct TDS and deposit it with the govt. |
| Threshold Limit for TDS Non-Deduction | (i) No TDS is applicable if annual sales for the year do not surpass INR 10,000 (ii) For People/HUFs with business T.O. ≤ INR 1 crore (INR 50 lakh for prescribed works): threshold is INR 50,000 Per FY |
Flat 30% Tax Rate
Under Section 115BBH, a flat 30% tax, including a 4% health and education cess and any applicable surcharge on top, is to be levied on any gain from transferring a Virtual Digital Asset (VDA), the legal term for crypto and NFTs. The rate does not rely on your income slab or how long you held the asset. Only the acquisition cost can be deducted, so costs like exchange fees normally cannot be claimed.
No Set-Off Against Crypto Losses
A loss on one cryptocurrency cannot offset tax on gains from another cryptocurrency or any other form of income, and these losses cannot be carried forward to future years. Each gain is taxed individually. Therefore, it’s possible to end up with a tax bill even in a year when you experience an overall loss, which is why cryptocurrency is often considered to have one of the most burdensome tax structures in Indian law.
What Do You Mean by a Taxable Event?
A common misconception is that tax only applies when you cash out to rupees. However, several other actions can trigger tax liability. The principle is that any “transfer” of a virtual digital asset (VDA) activates the 30% tax.
Tax shall be charged on selling crypto for rupees, swapping one crypto for another, and using crypto to pay for goods or services. Swapping often deceives people because it does not include the swapping of rupees, but the transfer is still taxable.
Crypto obtained as income, from mining, staking, airdrops, or as payment for work, is charged to tax, though the treatment varies- such receipts are typically taxed as income at your slab rate when you receive them, with the 30% rate applying later on transferring the asset.
What is not taxed: Only buying and holding cryptocurrency is not charged to tax on crypto in India. No tax is levied for owning crypto or because its value has increased on paper. The tax is applicable when you transfer it, whether by selling, swapping, or spending.
Method for Reporting Crypto in Schedule VDA
When filing your ITR, crypto income has its own specified section called Schedule VDA, where you report your gains from Virtual Digital Assets for the year.
It is not a one-way declaration. Crypto exchanges separately declare your transactions to the tax department, and your 1% TDS appears in the department’s records.
The system can verify what you had shown against what the exchange reported, and a mismatch can be shown automatically. Keep a detailed record of the date, amount, and rupee value of every buy, sell, and swap transaction you make across all exchanges and wallets you use.
Reconciling this information with your exchange’s reports before filing your taxes can help reduce the risk of discrepancies. Maintaining these records is also important because you need the acquisition cost to accurately calculate your gains.
How to Report Crypto Held on Foreign Platforms in ITR
An additional reporting layer applies for keeping crypto on foreign exchanges or wallets. Apart from Schedule VDA, resident and ordinarily resident taxpayers should disclose foreign assets, including crypto held abroad, in Schedule FA. There is no minimum amount below which the obligation to report overseas accounts disappears; even a small balance on an overseas platform must be reported.
The often-cited figure of 20 lakh rupees is frequently misunderstood. It is not a threshold for disclosure. Starting October 2024, it will represent the amount below which the penalties for non-disclosure of non-immovable foreign assets under the Black Money Act do not apply. However, the duty to report as required in Schedule FA remains, even for amounts below this figure.
Failure to disclose foreign holdings can lead to severe penalties under India’s Black Money Act, which are significantly more severe than ordinary tax penalties and can even include prosecution. From April 1, 2027, India is expected to join CARF, a global framework that facilitates the automatic sharing of cryptocurrency account information among countries.
Cryptocurrency Tax Penalties in India
Only paying the correct amount no longer leads to compliance. Specific penalties are there for reporting failures on both sides, the platform’s and yours.
From 1 April 2026, on the platform, crypto exchanges and other reporting entities will encounter penalties for failing to report transactions accurately. It comprises about 200 rupees per day for not submitting a required statement, and a flat 50,000 rupees for filing wrong data. These regulations focus on target platforms rather than individual users, compelling exchanges to report much more precise data for each account.
For individual taxpayers, the risks are more significant. If crypto income is not reported and is later discovered, it could lead to tax notices and penalties for the shortfall. Under-reporting income can result in a penalty of 50% of the owed tax, while intentional misreporting can incur a penalty of 200%. Additionally, failing to disclose foreign holdings introduces the risks associated with the Black Money Act mentioned earlier.
Crypto Tax Compliance Checklist
Start with records: Keep the date, amount, and rupee value of every crypto transaction throughout the year. You must be clear about the specified measures that are taxable, namely selling, swapping, and spending crypto, along with crypto received as income, while holding alone is not.
When filing, declare your crypto gains in Schedule VDA and reveal any foreign holdings in Schedule FA irrespective of value, reconciling everything against your exchange records first.
Keep the three rules in view: 30% tax including cess, 1% TDS, and the fact that losses cannot be compensated. Instead of guessing, take advice from a qualified chartered accountant due to stringent norms. Because of changing rules and thresholds, verify the latest official notifications.
Conclusion: Crypto Transactions and Tax Rates
| Transaction | Taxation |
|---|---|
| Selling crypto | 30% tax on capital gains |
| Buying crypto | 1% TDS deducted by the exchange (excluding international and P2P trades) |
| Crypto holding | Commonly tax-free |
| Crypto trading | 30% tax on any profits |
| Crypto airdrops | Considered as income; 30% tax if sold later |
| Hard forks | Taxed as income at the applicable tax rate upon receipt; 30% tax applies if sold later |
| Crypto moving b/w own wallets | Normally tax-free |
| Crypto donations | Any subsequent gains may be subject to 30% tax |
| Staking rewards | Income tax at individual tax rate; 30% tax if sold later |
| Gifts of crypto | Recipient would be taxed at standard rates, except for gifts received from close family members |
| Mining rewards | Income Tax at individual rate; 30% tax if sold later |
Crypto taxes in India are still evolving, and certain areas remain unclear and may require further guidance from the tax authorities. Clearer rules and interpretations can help taxpayers better understand their obligations & ensure smooth compliance.
