Crypto Tax in India 2026: The 30% Rule, the 1% TDS Trap — and 5 Mistakes That Cost Indian Holders Money

India taxes every rupee of crypto profit at a flat 30% — and takes 1% of every sale before you see a paisa of it, even when you sell at a loss. For most Indian holders the real rate is 31.2% once the cess is added, losses from one coin can never offset gains from another, and the tax department now gets your trading data straight from the exchanges. Days after enforcement officers raided two of India's biggest exchanges, CoinDCX and Delta Exchange, this is the guide every Indian crypto holder needs before the next filing deadline.

This is not a loophole hunt. India's crypto tax rules are among the harshest in the world, and they have not changed for FY 2026-27. What has changed is enforcement: a new exchange-reporting law, a rewritten Income Tax Act, and raids that show the department is matching exchange data against tax returns.

Crypto Tax in India at a Glance: The 5 Numbers That Matter

If you remember nothing else from this article, remember these five numbers. They decide almost every crypto tax bill in India.

Number	What it is	Why it matters
30%	Flat tax on every rupee of crypto gain (Section 115BBH)	No slab benefit, no long-term discount, no matter how long you held
31.2%	Effective rate for most retail investors (30% + 4% cess)	The rate you actually pay; up to 42.7% for the highest incomes
1%	TDS deducted on the full sale value (Section 194S)	Applies even on loss-making sales — it is not the tax, it is a pre-payment
₹50,000	Annual TDS threshold for most individuals	Below this in a year, no TDS is deducted; above it, 1% applies to the whole sale value
0	Losses you are allowed to set off or carry forward	A loss on one coin can never reduce tax on another coin's gain

Those five numbers are the whole regime in miniature. The rest of this guide is about how they bite in practice — and how to avoid paying more than the law actually demands.

What Counts as a Virtual Digital Asset?

India does not tax "crypto" as a loose idea. It taxes a legal category called a Virtual Digital Asset, or VDA, defined in Section 2(47A) of the Income-tax Act. The definition covers Bitcoin, Ethereum, Solana, stablecoins such as USDT and USDC, most altcoins, NFTs, and other tokens generated through cryptographic means. The Finance Act 2025 widened the definition further from 1 April 2026, adding a catch-all limb so that any crypto-asset representing value on a cryptographically secured distributed ledger is caught even if it does not fit the earlier categories neatly.

Excluded from the definition are the Indian rupee, foreign currency, central bank digital currency, gift cards, and redeemable reward points. In practice, if you bought it on an exchange and it trades against the rupee or a stablecoin, assume it is a VDA.

Two points about the definition matter more than they first appear. First, the tax applies on transfer — selling, swapping one coin for another, or spending crypto all count as transfers, while simply holding creates no tax bill. Second, because the definition is deliberately broad, new token types are pulled into the net automatically.

Section 115BBH: The 30% Flat Tax, With a Worked Example

Section 115BBH is the heart of the regime. Any income from transferring a VDA is taxed at a flat 30%, plus surcharge where applicable and a 4% health and education cess. The rate does not depend on your income slab, on how long you held the asset, or on whether you are a trader or an investor. A one-day flip and a five-year hold are taxed identically.

The calculation allows exactly one deduction: the cost of acquisition — what you paid to buy the coin. You cannot deduct exchange fees, gas fees, platform charges, internet costs, or advisory fees. The taxable gain is simply the sale consideration minus the cost of acquisition, and 30% of that is the tax.

Here is a worked example. Suppose you bought 1 BTC for ₹50,00,000 and sold it for ₹65,00,000:

Step	Amount
Sale consideration	₹65,00,000
Less: cost of acquisition	₹50,00,000
Taxable gain	₹15,00,000
Tax at 30%	₹4,50,000
Add: 4% health and education cess	₹18,000
Total tax payable	₹4,68,000

That is an effective rate of 31.2% on the gain. For high earners the surcharge pushes the effective rate higher — up to about 42.7% where total income exceeds ₹5 crore. And remember the timing: the tax is due in the year of the transfer, whether or not you have withdrawn the money to your bank account. Moving profits into a stablecoin does not defer it — a crypto-to-crypto swap is itself a transfer.

Section 194S: The 1% TDS Trap

The 1% TDS under Section 194S is the rule that surprises Indian crypto holders most, because it applies even when you make no profit. When you sell a VDA, the buyer — in practice the exchange — must deduct 1% tax at source on the full sale value, not on the gain. Sell ₹10,00,000 of Bitcoin at a loss and ₹10,000 is still deducted.

TDS applies once your aggregate transfers in a financial year cross a threshold: ₹50,000 a year where the payer is a "specified person" (broadly, an individual or HUF not liable to tax audit), and ₹10,000 a year in other cases. Indian exchanges deduct it automatically on sell trades above the threshold. The deducted amount appears in your Form 26AS and Annual Information Statement, and — critically — it is a credit against your final tax bill, not an extra tax. You claim it when you file your return, and if your total TDS exceeds your actual liability, the excess is refunded.

Take the worked example above. On the ₹65,00,000 sale, 1% TDS is ₹65,000. That ₹65,000 is deducted at the time of sale. Your total tax is ₹4,68,000, so after claiming the TDS credit you pay the remaining ₹4,03,000 with your return. The trap is psychological as much as financial: many holders see the 1% deduction and assume their tax is handled. It is not — the TDS is roughly a fifth of the real bill in this example, and the balance is your responsibility.

There is a second trap for users of foreign exchanges. An overseas platform may not deduct TDS at all. That does not mean no tax is due — it means the entire liability falls on you, including advance tax and interest for late payment. Indian residents are taxed on global income, and crypto held on a foreign exchange must still be reported, including in Schedule FA of the return, which covers foreign assets.

The 5 Mistakes That Cost Indian Holders Money

Most of the money Indian crypto holders lose to tax is not lost to the 30% rate itself. It is lost to avoidable mistakes. Run through this checklist before you file.

Mistake 1: Treating the 1% TDS as the tax

The most expensive misunderstanding in Indian crypto tax. The 1% deducted at sale is a pre-payment, not the final bill. The real liability is 30% of the gain plus cess — typically 31.2% of your profit. Holders who spend the sale proceeds and forget the balance due discover the shortfall at filing time, with interest for late payment added on top. Set aside 31.2% of every gain the moment you sell.

Mistake 2: Offsetting losses against gains

Indian tax law is unusually harsh here. A loss on one VDA cannot be set off against a gain on another VDA, even in the same financial year, and VDA losses cannot be set off against salary, business income, or capital gains from shares. Nor can they be carried forward to a future year. Imagine you made ₹2,00,000 on Bitcoin and lost ₹1,50,000 on Ethereum in the same year: you still pay 31.2% on the full ₹2,00,000 — ₹62,400 — and the ₹1,50,000 loss simply vanishes for tax purposes. This is the single biggest difference between Indian crypto tax and the rules in most other countries, where loss offset is routine.

Mistake 3: Deducting fees and expenses that are not allowed

Only the cost of acquisition is deductible. Exchange trading fees, withdrawal fees, gas fees, and subscription costs cannot be deducted from your gain. Many holders compute their gain net of fees and under-report by a few thousand rupees per trade — small per trade, but across a year of active trading it adds up, and the tax department's data matching makes under-reporting easy to spot. Keep a separate record of fees for your own profit calculations, but do not subtract them on the return.

Mistake 4: Filing the wrong return or skipping Schedule VDA

Every VDA transaction must be reported in Schedule VDA of your income tax return, which means filing ITR-2 or ITR-3. ITR-1 cannot be used if you have any crypto activity at all. Holders with foreign exchange accounts must also fill in Schedule FA, declaring foreign holdings whether or not anything was sold. Skipping these schedules is one of the most common filing errors — and one of the easiest for the department to detect, since exchange data now flows to it directly.

Mistake 5: Ignoring gifts, airdrops, and mining rewards

Not all crypto income comes from selling. Crypto received as a gift is taxable in the recipient's hands if its value exceeds ₹50,000 and the giver is not a close relative. Airdrops and staking rewards are generally treated as income when received, taxed at your slab rate, and then the 30% rate applies to any later gain when you sell. Mining rewards are treated as income too, and the tax department's position is that mined coins have a zero cost of acquisition — so the full sale value can be taxed on transfer. None of this is captured by the 1% TDS.

What Is New in 2026: Reporting, a New Tax Act, and the Raids

The rates have not changed for FY 2026-27, but the enforcement machinery around them has moved sharply — and that is the real story of crypto tax in India this year.

First, Section 285BAA is now in force. This new provision makes crypto exchanges and other reporting entities file detailed statements of user transactions with the tax department. It is the legal backbone of the data-matching that now links your exchange activity to your return, and failures to report can attract penalties of up to ₹50,000. The Income Tax Department has also published a plain-language explainer on its official website reaffirming the 30% rate and the 1% TDS, while putting the new reporting duty at the centre of the compliance picture.

Second, the Income Tax Act 2025 applies from 1 April 2026 (tax year 2026-27). The substance of the crypto rules is unchanged, but the section numbers have moved: the 30% rate now sits in the new Act's rate provisions and the TDS rule in its withholding chapter. If you are reading older guides that cite Section 115BBH and Section 194S, those are the 1961 Act numbers — the rates and mechanics they describe still apply, just under new numbering.

Third, enforcement has become visible. On 7 November 2026, the Enforcement Directorate raided CoinDCX and Delta Exchange, alleging thousands of crores were routed offshore through USDT in a foreign-exchange probe. Our full report on the CoinDCX and Delta Exchange raids sets out what Indian holders should check now. The message for ordinary holders is that the department's visibility into exchange flows is now a fact of life, and unreported trading is far more likely to be noticed than it was two years ago.

India vs the World: How the 30% Rate Compares

India's regime looks even harsher in international comparison. The table below uses the rates from our country-by-country tax guides.

Country	Tax on crypto gains	Loss offset allowed?	Withholding at sale?
India	30% flat (+ 4% cess = 31.2%)	No	Yes — 1% TDS
United States	0% / 15% / 20% by income, plus possible 3.8% net investment tax	Yes, plus $3,000 a year against other income	No (1099-DA reporting instead)
United Kingdom	24% capital gains tax, £3,000 annual allowance	Yes	No
Germany	0% if held over 1 year; otherwise taxed at your income-tax rate	Yes, within limits	No
Portugal	0% if held over 1 year; 28% on short-term gains	Yes	No
UAE	0% personal income tax on crypto gains	Not applicable	No

The comparison is stark: an Indian holder pays more than double the top US long-term rate, has no annual allowance, no holding-period relief, and no loss offset — the only three things that soften crypto tax almost everywhere else. If you are comparing jurisdictions, our Crypto Tax in the US 2026 guide and our Crypto Tax in Germany 2026 guide show how different the same trade can be taxed across borders.

How to Report Crypto on Your ITR: A 6-Step Checklist

Reporting is straightforward once you know the sequence. Use this checklist when you file.

• Step 1 — Gather every trade record: download complete transaction histories from every exchange you used, Indian and foreign, plus wallet transfers and DeFi activity.
• Step 2 — Compute gains coin by coin: for each VDA, sale consideration minus cost of acquisition. Remember: no loss offset, no fee deductions.
• Step 3 — Match your TDS credits: check Form 26AS and your Annual Information Statement for the 1% TDS already deducted, and claim every rupee as a credit.
• Step 4 — Pick the right form: use ITR-2 (or ITR-3 if you trade as a business), never ITR-1, and fill in Schedule VDA for every transaction.
• Step 5 — Declare foreign holdings: complete Schedule FA for any crypto held on foreign exchanges or wallets, even if you sold nothing.
• Step 6 — Pay advance tax on time: if your total tax liability exceeds ₹10,000 in a year, advance tax instalments apply — pay them quarterly to avoid interest charges.

One practical tip: Indian exchanges now issue TDS certificates and annual statements that map closely to Schedule VDA. Reconcile those statements against your own records before filing; mismatches between what the exchange reported and what you declare are the most common trigger for a tax notice.

Frequently Asked Questions

Do I pay crypto tax in India if I only hold and never sell?

No tax is due on unsold holdings, because the 30% rate applies on transfer. But holding is not invisible: crypto on foreign exchanges must be declared in Schedule FA, and the exchange-reporting rules mean the department already knows what you hold. Keep records from the day you buy, not the day you sell.

Is the 1% TDS refundable?

Yes. TDS is a credit against your final liability, not a separate tax. If the TDS deducted across the year exceeds 30% of your actual gains plus cess, the excess is refunded when you file. The reverse is more common: the 1% is only a fraction of the real bill, so budget for the balance.

Can I offset crypto losses against stock market gains?

No. Section 115BBH blocks set-off of VDA losses against any other income, including gains from shares, and blocks carry-forward to future years.

What if I trade on a foreign exchange that does not deduct TDS?

You still owe the full 30% plus cess on your gains. The absence of TDS deduction changes nothing about the liability; it only means you must pay the whole amount yourself, as advance tax during the year and self-assessment tax at filing. You must also report the holdings in Schedule FA. The CoinDCX and Delta raids underline that offshore routing is now a focus of enforcement.

Are airdrops and staking rewards taxed?

Yes, in two stages. Rewards received — airdrops, staking income, mining rewards — are generally taxed as income when received, at your slab rate. When you later sell those tokens, the 30% rate applies to the gain on transfer. For mined coins the department's position is that the cost of acquisition is zero, so the entire sale value can be taxed.

Will the 30% rate be reduced in the next Budget?

There is no official indication of a cut. The rate has survived every Budget since it was introduced in 2022, the Income Tax Department's 2026 explainer reaffirmed it, and the policy direction has been toward tighter reporting rather than lower rates. Plan on the basis that 30% plus cess is the rate for the foreseeable future.

Conclusion

Crypto tax in India is simple to state and expensive to ignore: 30% on every gain, 1% TDS on every sale, no loss offset, no fee deductions, and a reporting net that now reaches from the exchanges directly into your tax return. The 31.2% effective rate is the number to plan around, the five mistakes above are the traps to avoid, and the new Section 285BAA reporting duty plus the CoinDCX and Delta raids are the reason to file cleanly this year rather than hoping nobody notices.

If you are new to buying crypto in India, start with our How to Buy Bitcoin in India in 2026 guide, which compares five FIU-registered exchanges on fees, UPI payments, and how the 30% tax eats into your profit. And if you want to understand how the asset itself works before you worry about taxing it, our What Is a Bitcoin ETF? guide explains the $1.28 billion of ETF outflows that shaped this month's market — and why the tax rules apply whether the market is up or down.

Disclaimer: This article is for general information only and is not tax, legal, or financial advice. Indian tax law changes frequently and individual circumstances vary. Consult a qualified chartered accountant or tax adviser before filing.

Sources: Crypto Times — India Crypto Tax 2026; Finclar Tax — Crypto/VDA Taxation in India; Legal Suvidha — Crypto Tax India FY 2026-27; Online NIFM — Crypto Tax in India 2026.