If you sell, swap, or spend crypto in India, you owe a flat 30 percent tax on the profit, plus a 4 percent cess, with no deduction allowed except what you originally paid for it. On top of that, most transactions also get hit with a 1 percent TDS at the time of transfer. That is the entire framework in one sentence, and Budget 2026 left it untouched. Everything else, the exceptions, the filing mechanics, the penalty regime that just got sharper, is detail sitting underneath that one core rule. This guide walks through all of it the way it actually plays out when real money and a real ITR form are involved.
Take a Look at the Crypto Tax Calculator.
What Counts as a Virtual Digital Asset
India does not use the word cryptocurrency in its tax code. It uses Virtual Digital Asset, or VDA, a term defined under Section 2(47A) of the Income Tax Act. A VDA covers cryptocurrencies like Bitcoin and Ethereum, NFTs, DeFi governance tokens, and stablecoins, essentially any digital token generated cryptographically that represents value and can be transferred or stored electronically. The Finance Act 2025 tightened this definition further by explicitly adding the term crypto asset from April 1, 2026, closing any argument that a particular token might fall outside the law. If it moves on a blockchain and has value, the tax department now almost certainly considers it a VDA.
The 30 Percent Flat Tax, Explained in Plain English
Under Section 115BBH, profit from transferring a VDA is taxed at a flat 30 percent, regardless of your income slab and regardless of how long you held the asset. There is no long term versus short term distinction the way there is with stocks or property. Sell crypto within a day or hold it for five years, the rate does not move. The only deduction allowed is your original cost of acquisition, nothing else. Trading fees, internet costs, mining hardware, none of it reduces your taxable gain. And critically, if you lose money on one coin, that loss cannot offset a gain on another coin, or on any other income you earn that year. Each transaction stands entirely on its own.
The 1 Percent TDS Rule and Why It Catches Traders Off Guard
Section 194S adds a second layer most first time investors do not see coming. Every time you transfer a VDA above the prescribed threshold, currently ₹50,000 a year for specified persons and ₹10,000 for everyone else, 1 percent of the transaction value gets deducted at source, either by the exchange or, in peer to peer trades, by the buyer directly. This is not an extra tax stacked on top of the 30 percent, it is an advance credit against your final liability, similar in spirit to TDS on a salary. But for active traders making dozens of trades a month, that 1 percent bite on every single transaction adds up to a real cash flow drag long before any profit is confirmed at year end.
What Budget 2026 Actually Changed
Industry bodies lobbied hard ahead of Budget 2026 for relief, some pushing to cut TDS from 1 percent down to 0.01 percent, others asking for the reporting threshold to rise to ₹5 lakh. None of it landed. The Finance Minister kept the 30 percent tax and the 1 percent TDS exactly as they were. What did change is enforcement. Starting April 1, 2026, reporting entities face concrete penalties for failing to file crypto transaction statements accurately, including a daily fine for late filing and a flat penalty for incorrect reporting. CoinSwitch co-founder Ashish Singhal called it a formalization of compliance standards rather than a reform, and that framing captures the mood across the industry heading into the new financial year.
Worked Example: Calculating Tax on a Real Trade
Numbers make this concrete faster than definitions do. Say you bought 0.5 Bitcoin for ₹12,00,000 in August 2025 and sold it in January 2026 for ₹18,00,000. Your profit is ₹6,00,000. Apply the flat 30 percent and you owe ₹1,80,000 in tax, plus a 4 percent cess on that amount, bringing the effective liability to roughly ₹1,87,200. It makes no difference that this was your only income that year or that you would otherwise sit in a 5 percent tax slab. The 30 percent rate applies regardless. Now imagine you also lost ₹50,000 trading an altcoin the same year. That loss provides zero tax relief here, since VDA losses cannot be set off against VDA gains or against anything else.
Crypto Tax vs Stock Market Tax: A Side by Side Comparison
| Feature | Crypto (VDA) | Listed Equity Shares |
|---|---|---|
| Tax rate | Flat 30% regardless of holding period | 20% short term (under 12 months), 12.5% long term |
| Holding period benefit | None | Long term holding reduces rate significantly |
| Loss set off | Not allowed, even against other crypto gains | Allowed against capital gains, carry forward up to 8 years |
| TDS | 1% on most transfers under Section 194S | None on regular market trades |
| Deductible expenses | Only cost of acquisition | Brokerage, STT, and related costs generally deductible |
The gap in this table is the whole reason crypto is often called the most heavily taxed asset class available to Indian retail investors. Equity rewards patience and allows genuine loss relief. Crypto currently does neither.
Risks and Mistakes That Trigger Notices
A few misconceptions get investors into trouble every filing season. Swapping one coin for another, say Bitcoin for Ethereum, feels like it should not count as a taxable event since no rupees changed hands, but under Indian law it absolutely does, treated as a sale of the first asset and a purchase of the second. Crypto received as a gift above ₹50,000 from someone who is not a specified relative is taxable in the recipient’s hands at slab rates under Section 56(2)(x). Holding crypto on a foreign exchange does not exempt you either, since Indian residents must disclose those holdings in Schedule FA, and non-disclosure risks penalties under the Black Money Act. Since exchanges now report transaction data directly to the tax department, mismatches between what you file and what gets reported tend to surface fast.
Practical Steps to File Correctly
Start by pulling a complete transaction history from every exchange and wallet you have used during the financial year, since consolidating this after the fact is where most errors creep in. Reconcile every TDS entry against Form 26AS and the Annual Information Statement to confirm the credits match what was actually deducted. Report each VDA transaction individually in Schedule VDA within ITR-2 or ITR-3, listing acquisition date, transfer date, cost, and sale value line by line rather than as a lump sum. If your total tax liability including crypto gains crosses ₹10,000, pay advance tax across the quarterly deadlines to avoid interest under Sections 234B and 234C. Tools like KoinX or CoinTracker can generate ITR ready reports from exchange data, which is often worth the cost for anyone with more than a handful of trades.
Frequently Asked Questions
What is the crypto tax rate in India in 2026? A flat 30 percent on profits under Section 115BBH, plus a 4 percent cess, regardless of income slab or how long the asset was held.
Does crypto to crypto trading get taxed in India? Yes. Swapping one VDA for another is treated as a sale of the first asset, triggering tax on any profit from that leg of the trade.
Can I offset crypto losses against other income? No. VDA losses cannot be set off against other crypto gains or any other income, and they cannot be carried forward to future years.
What is the TDS threshold for crypto transactions? 1 percent TDS applies once transfers cross ₹50,000 a year for specified persons or ₹10,000 a year for everyone else, under Section 194S.
Did Budget 2026 change crypto tax rates in India? No. The 30 percent tax and 1 percent TDS remain unchanged, though stricter reporting penalties for exchanges took effect from April 1, 2026.
Where do I report crypto income in my ITR? In Schedule VDA within ITR-2 or ITR-3, listing each transaction separately with acquisition date, transfer date, cost, and sale consideration.
Sources and Related Reading
This guide draws on the Income Tax Act provisions under Sections 115BBH and 194S, Budget 2026 coverage from Cryptopolitan and Yahoo Finance, and filing guidance published by CoinDCX, Unocoin, and TokenTax. For official filing, always cross check current thresholds and deadlines on the Income Tax e-filing portal before submitting your return.
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