India's 30% crypto tax and 1% TDS — how the rules actually work

If you're an Indian tax resident holding crypto, two numbers define your tax liability: 30% flat tax on gains and 1% TDS on every transaction above ₹10,000. There are no exemptions, no long-term/short-term distinctions, no offsetting losses against other gains, and no carry-forward of losses. The framework — introduced in the 2022 Finance Act and refined since — is one of the strictest crypto tax regimes in any major jurisdiction.

This post walks through how the rules actually work, what counts as a "virtual digital asset" (VDA) under Indian law, how the TDS mechanism interacts with exchanges, and what the practical implications have been for Indian crypto traders. For the live valuation reference you'd use to track your INR-denominated holdings, see the BTC to INR converter and ETH to INR converter.

Important: This is a general overview of how the rules work, not personal tax advice. The Indian crypto tax framework has been refined repeatedly through Income Tax Department circulars and continues to evolve. Confirm specifics with a chartered accountant before filing.

The two core rules

Section 115BBH of the Income Tax Act (introduced in the 2022 Finance Act, effective from April 1, 2022) imposes:

• 30% flat tax on income from the transfer of virtual digital assets, plus applicable surcharge and 4% health-and-education cess.
• No deductions allowed except the cost of acquisition. No transaction fees, no internet costs, no platform fees — just acquisition cost.
• No set-off of losses against other income heads (salary, business, other capital gains). Losses on one VDA cannot even be set off against gains on another VDA.
• No carry-forward of losses. A losing year is just a losing year, fiscally — you can't apply it to next year's gains.

Section 194S (effective from July 1, 2022) imposes:

• 1% TDS (Tax Deducted at Source) on every transfer of a virtual digital asset above ₹10,000 in a financial year.
• The TDS is collected by the buyer (in P2P) or the exchange (when transacting on-platform) and paid to the Income Tax Department.
• The TDS amount can be claimed as credit against your final tax liability when you file your annual return — but the cash-flow impact is immediate and unavoidable.

These two rules together produce the basic Indian crypto tax math:

Tax on gains = 30% of (sale price - acquisition cost) + cess + surcharge, plus 1% of every transaction value paid as TDS along the way.

What counts as a "virtual digital asset" (VDA)

Section 2(47A) of the Income Tax Act defines VDAs broadly. The definition covers:

• Cryptocurrencies (BTC, ETH, SOL, XRP, etc.).
• Non-fungible tokens (NFTs).
• Any digital asset that can be transferred, stored, or traded electronically and has economic value.
• Tokens that represent ownership, value, or rights through cryptographic means.

Stablecoins (USDT, USDC, DAI) fall under the same VDA framework. Exchanges treat them identically to other crypto for TDS and 30% tax purposes.

The framework explicitly excludes the proposed Digital Rupee (the central bank digital currency being piloted by the RBI), gift cards, and reward points programmes. Everything else crypto-shaped is in scope.

How TDS works in practice

The 1% TDS is the mechanic that most traders feel day-to-day. Three scenarios:

1. Trading on an Indian exchange (CoinDCX, ZebPay, WazirX, Mudrex, etc.)

The exchange deducts 1% TDS on every sale and remits it to the IT Department on your behalf. Your account shows the TDS deducted in your transaction history. You claim it back as a credit when filing your annual ITR (Form 26AS reflects the TDS automatically).

2. Trading on a foreign exchange (Binance, Coinbase, Kraken)

Foreign exchanges generally don't deduct TDS — the legal obligation is on the Indian resident performing the transaction to either ensure TDS is deducted by the counterparty or self-deduct. In practice, Indian residents using foreign exchanges are responsible for TDS compliance themselves, with all the audit risk that implies.

3. P2P transactions

The buyer is responsible for deducting 1% TDS from the payment to the seller and depositing it with the IT Department within 30 days, using Form 26QE. In practice, P2P buyers and sellers either gross the price up to absorb the TDS, build it into the negotiated rate, or one party absorbs the compliance burden.

The TDS threshold of ₹10,000 per financial year applies per buyer-seller relationship. Multiple small transactions with the same counterparty aggregate.

The 30% tax — calculating your liability

The 30% rate applies to the gain, computed simply:

Gain = Sale value (INR) - Acquisition cost (INR)

Allowable items in acquisition cost: only the actual cost of acquiring the VDA. Not allowed: trading fees, withdrawal fees, bank charges, advisory fees, internet/electricity costs, mining hardware depreciation, exchange security losses.

A worked example:

• You bought 0.1 BTC on CoinDCX in May 2024 for ₹4,50,000.
• You sold the same 0.1 BTC in September 2025 for ₹6,80,000.
• Gain = ₹6,80,000 - ₹4,50,000 = ₹2,30,000.
• Tax = 30% × ₹2,30,000 = ₹69,000.
• Cess (4%) = ₹2,760.
• Total tax: ₹71,760.
• Plus 1% TDS on the sale (₹6,800) was already deducted by CoinDCX. That ₹6,800 becomes a credit against the ₹71,760, so net additional tax due at filing: ₹64,960.
• Surcharge applies if total income exceeds ₹50 lakh.

Crypto-to-crypto trades are also taxable disposals. Trading 0.1 BTC for ETH at a moment when the BTC's INR value is ₹6,00,000 (against your acquisition cost of ₹4,50,000) creates a ₹1,50,000 taxable gain on the BTC leg, plus 1% TDS on the ₹6,00,000 transaction.

What the framework changed in the Indian market

The 30%-tax-and-TDS regime had three immediately-visible effects on Indian crypto activity:

1. Volume on Indian exchanges collapsed. WazirX (then-leading Indian exchange) saw monthly volumes drop ~70% from late-2021 peaks within the first six months of the new rules. Some of that volume migrated to foreign exchanges where TDS enforcement is structurally weaker; some left the market entirely.

2. Web3 talent emigration accelerated. Several Indian crypto founders relocated companies to Dubai, Singapore, or Malta — jurisdictions where holding-company structures offer materially better tax treatment. The Indian government has periodically debated whether the framework is too punitive but has not adjusted the headline rates as of 2025-2026.

3. P2P and stablecoin parking grew. Indian users who continue trading actively often hold stablecoin balances and rotate selectively, since each on-platform conversion triggers the 1% TDS hit. Long-term holding (which still pays 30% on eventual gain but no per-trade TDS friction) became the dominant strategy for non-active investors.

The "loss restriction" — the inability to offset crypto losses against gains in the same or future years — is widely considered the most punitive single feature. A trader with ₹5L gains on BTC and ₹3L losses on ETH still owes 30% × ₹5L = ₹1.5L in tax. The ETH loss is fiscally invisible.

Reporting obligations

VDAs must be declared in the annual Income Tax Return (ITR-2 for individuals with capital gains, ITR-3 for those with business income from crypto). Key fields:

• Schedule VDA in the ITR captures all VDA transactions during the year — date of acquisition, date of transfer, cost, sale value, gain/loss.
• Schedule FA (Foreign Assets) must include any crypto held on non-Indian exchanges, with details of the exchange, country, address, peak balance during the year, and value at year-end.
• Form 26AS (auto-populated from exchange-reported data) reflects TDS deducted across all your Indian-exchange activity.

Foreign-asset disclosure is heavily-enforced and the penalties for non-disclosure are severe (up to ₹10 lakh penalty plus tax + interest for undisclosed foreign holdings under the Black Money Act). Indian residents holding crypto on Binance, Coinbase, or in self-custodied wallets domiciled abroad must disclose accurately.

Practical advice for Indian crypto holders

Use Indian exchanges for active trading where convenient. TDS is automatic, Form 26AS reconciles for you, and Schedule VDA reporting is straightforward.

Track every crypto-to-crypto trade with INR equivalent at the moment of trade. Even if you never touch INR, the gain is computed in INR. Most Indian exchanges retain this data; for foreign-exchange or self-custodied activity, maintain records yourself.

Don't expect to net losses against gains. Each VDA disposal stands alone for tax purposes. Plan as if every gain is fully taxable regardless of offsetting losses.

Stablecoin parking can reduce friction. Holding USDT or USDC between trades doesn't avoid tax on eventual disposal but avoids unnecessary intermediate taxable events from rotating between volatile assets.

Keep TDS certificates and Form 26AS documentation. Discrepancies between your records and Form 26AS are a common cause of ITR scrutiny.

The BTC to INR converter and ETH to INR converter provide live INR-equivalent valuation for tracking holdings and computing acquisition cost / disposal value. The crypto-fiat converter hub covers BTC, ETH, SOL, and XRP against INR plus 11 other major fiats.

Will the rules change?

The Indian crypto tax framework is widely criticized — by industry, by economists, and periodically by parliamentary committees. The government has signaled openness to refinements (specifically: allowing loss set-offs and reducing the 1% TDS friction) without committing to them. As of 2026, none of the headline rules has been changed.

What's more likely than near-term tax reform is the gradual operationalization of:

• CBDC integration. The Digital Rupee pilot is expanding through 2025-2026 and may eventually offer regulated crypto-rail integrations that the current framework treats more favorably.
• G20-coordinated reporting standards. India's adoption of the OECD Crypto-Asset Reporting Framework (CARF) by 2027 will improve foreign-exchange reporting accuracy, increasing audit risk for non-disclosed holdings.
• Sector-specific exemptions. Carve-outs for tokenized real-world assets, regulated stablecoins, or central-bank-coordinated structures are periodically discussed but not codified.

For the foreseeable future, Indian crypto holders should plan around the 30%/1% framework as the operating reality.

FAQ

Related reading

• Japan's high-rate framework — Japan taxes the same activity as miscellaneous income at up to 55%.
• Brazil's threshold exemption — Brazil exempts disposals under R$35,000 per month entirely — no flat-rate equivalent.
• Australia's CGT discount — Australia gives a 50% CGT discount after 12 months of holding.