Crypto Taxation in India

India operates one of the world's most explicitly codified cryptocurrency tax regimes. Introduced by the Finance Act 2022 and effective from 1 April 2022, Section 115BBH of the Income Tax Act 1961 and Section 194S together form the statutory framework for Virtual Digital Assets (VDAs). The rules apply uniformly to individuals, Hindu Undivided Families, companies, and all other taxpayers.

What counts as a Virtual Digital Asset?

Section 2(47A) of the Income Tax Act 1961 defines a VDA as any information, code, number, or token (not being Indian or foreign fiat currency) generated through cryptographic means or otherwise and providing a digital representation of value. The definition covers Bitcoin, Ether, and other cryptocurrencies; non-fungible tokens (NFTs); and any other digital asset the Central Government may notify. Items explicitly excluded include gift cards, loyalty points, subscriptions, and Central Bank Digital Currencies. The Income Tax Department's January 2026 guidance document on VDA taxation confirms this scope remains unchanged for Assessment Year 2026-27.

What is the tax rate on VDA gains under Section 115BBH?

Section 115BBH imposes a flat 30% income tax on gains from the transfer of any VDA, with no distinction between short-term and long-term holdings. The only permitted deduction is the cost of acquisition; no transaction fees, mining costs, electricity costs, or other expenses may be deducted (Income Tax Department, Taxation of VDA, 2026). No set-off of VDA losses against any other head of income is permitted, and no carry-forward of VDA losses to subsequent assessment years is allowed under Section 115BBH(2). Applicable surcharge (ranging from 10% to 25% of the tax amount under the new tax regime, depending on total income) and a 4% health-and-education cess are levied on top of the 30% base rate, producing an effective minimum rate of approximately 31.2% for taxpayers whose income does not cross the surcharge threshold.

Surcharge rates above reflect the new tax regime cap of 25%; individuals opting for the old tax regime face a 37% surcharge on income above INR 5 crore, producing an effective VDA rate of approximately 42.7% with cess. Marginal relief applies where income only marginally crosses a surcharge threshold.

How does the 1% TDS under Section 194S work?

Section 194S, effective 1 July 2022, requires a 1% Tax Deducted at Source on the consideration paid for any VDA transfer. The obligation to deduct falls on the buyer in peer-to-peer transactions, and on the exchange or platform in market transactions. The TDS applies only above the following thresholds in a financial year: INR 50,000 for specified persons (individuals or Hindu Undivided Families whose business turnover does not exceed INR 1 crore, or professional receipts do not exceed INR 50 lakh); and INR 10,000 for all other buyers. CBDT Circular No. 13 of 2022 and Circular No. 14 of 2022 provide guidance on compliance for exchanges, peer-to-peer platforms, and barter scenarios. The TDS deducted appears in the seller's Form 26AS and may be claimed as a credit against the final Section 115BBH tax liability when filing the annual Income Tax Return. The compliance form is Form 26QE for resident-to-resident transfers.

How are VDA gifts taxed?

Virtual Digital Assets received as gifts are governed by Section 56(2)(x) of the Income Tax Act. Where the aggregate fair market value of VDAs received as gifts from non-relatives in a financial year exceeds INR 50,000, the entire amount is taxable as income from other sources at the recipient's applicable slab rates (not the flat 30%, because no transfer of a capital asset by the recipient has occurred at the point of receipt). Gifts from specified relatives (spouse, siblings, parents, and lineal ascendants or descendants) are exempt at the point of receipt. When the recipient subsequently transfers the gifted VDA, Section 115BBH applies at 30% on the gain calculated from the cost in the donor's hands, per CBDT guidance.

How are VDA gains reported on the Income Tax Return?

VDA income must be reported in Schedule VDA, a dedicated schedule introduced in the Income Tax Return forms from Assessment Year 2022-23 onward. The schedule requires the date of acquisition and disposal, the cost of acquisition, the full sale consideration, and the TDS deducted under Section 194S. Schedule CG Table F captures quarterly breakdowns for VDA gains treated as capital receipts. Taxpayers with no business income use ITR-2; those with business income or frequent trading classified as business use ITR-3. Records must be retained for six assessment years (eight years in tax-audit cases). The Income Tax Department's Schedule VDA guidance page confirms these requirements for AY 2026-27.

For guidance tailored to your circumstances, consult a qualified Chartered Accountant registered with the Institute of Chartered Accountants of India (ICAI) or a tax practitioner listed on India country overview and the TaxPros Rated India directory.