Crypto Tax in India: 30% Tax, 1% TDS and How It Works

Crypto Tax in India: 30% Tax, 1% TDS and How It Works

The short answer

Gains made from transferring virtual digital assets are subject to a flat 30% tax, plus surcharge and cess, under section 115BBH of the Income-tax Act. This applies regardless of how long the asset was held. Only the cost of acquisition may be deducted when calculating the gain.

Separately, a 1% tax deducted at source, or TDS, applies to transfers of crypto above a threshold under section 194S. TDS is tax collected by the payer and deposited with the government on the taxpayer’s behalf. It appears in the taxpayer’s tax statement and can be claimed in the income tax return.

Losses from crypto cannot be set off against income from other sources, and they cannot be carried forward. Crypto income is reported in a dedicated schedule for virtual digital assets in the income tax return. Budget 2026 left both the 30% rate and the 1% TDS unchanged.

The 30% tax on gains

A transfer means disposing of or transferring a virtual digital asset. For tax purposes, the starting point is the gain arising from that transfer. In simple terms, the gain is the amount received from the transfer minus the cost of acquisition. The only permitted deduction is the cost of acquisition.

The tax rate is flat. There is no different rate based on the length of time the crypto was held. An asset held for a short period is not taxed at one rate, while an asset held for a longer period is not taxed at another. The applicable rate remains 30% under section 115BBH.

Surcharge and cess also apply. Surcharge is an additional charge in relevant circumstances, while cess is a further levy on tax. Because their application can affect the final amount, the headline rate of 30% should not be treated as the complete tax charge in every case. The facts of the taxpayer’s situation must be considered.

The calculation can be expressed as:

• Gain: amount received from the transfer, less the cost of acquisition.
• Tax before surcharge and cess: 30% of that gain.
• Final tax: the applicable tax, including surcharge and cess.

Only the cost of acquisition may be deducted under the rule stated in this guide. Taxpayers should not automatically add unrelated expenses to the calculation. If it is unclear whether a particular payment or cost forms part of the acquisition cost, a qualified tax professional should review the transaction records.

Tax is generally determined after the transfer. It is therefore important to keep evidence of the acquisition cost, the transfer and the amount received. Without reliable records, it can be difficult to explain the calculation or support the figures entered in the return.

No set-off of losses

A loss occurs when the amount received from a transfer is lower than the cost of acquisition. The loss treatment is restrictive: crypto losses cannot be set off against other income. They also cannot be carried forward to a later period.

This differs from the way a taxpayer may treat an allowable loss from another source of income. A loss on one crypto transfer cannot be used to reduce salary income, income from a house or property, business income, or any other category of ordinary income. Nor can it be accumulated and used against a future gain.

The restriction also applies to gains across different crypto assets. If one crypto transfer produces a gain and another produces a loss, the loss cannot be used to reduce the gain under the rule described here. The gain remains subject to the tax rules applicable to crypto gains.

This means that a loss should not be treated like a tax credit or a deductible item in the wider return. The taxpayer reports the relevant crypto activity in the dedicated schedule for virtual digital assets, but the loss does not create an offset against other income and does not create a loss carried forward.

Care is especially important when trades or transfers happen frequently. Each transaction should be examined with its own acquisition cost and transfer value. Investors should not assume that profitable and unprofitable crypto transfers can be freely combined for tax purposes.

The 1% TDS

TDS means tax deducted at source. It is collected when a payment is made or credited, depending on the applicable rule, and is deposited with the government by the person responsible for paying it. Section 194S provides for a 1% TDS on transfers of crypto above a threshold.

The threshold matters because the TDS rule does not apply in the same way to every transfer. This guide does not specify the threshold amount, so taxpayers should confirm the applicable limit rather than assume that every transfer attracts TDS.

TDS is different from the final tax calculated on a crypto gain. The 30% rate applies to gains from transfers under section 115BBH. The 1% rate under section 194S is deducted at the time of an applicable transfer. One is therefore a tax on the gain; the other is a prepayment or credit that can be claimed in the return.

The taxpayer should check the tax statement for the TDS deducted. The credit appears there and can be claimed in the income tax return. It should not simply be ignored because no payment was made directly to the government, and it should not be claimed again if it has already been reflected as a credit.

Budget 2026 left the 1% TDS unchanged. Taxpayers should therefore plan for both parts of the framework: the 30% tax on gains, including surcharge and cess where applicable, and the 1% TDS on transfers above the threshold.

Worked examples

The following examples use variables because the tax result depends on the transaction amounts and the facts of each case.

1. A profitable crypto transfer: Suppose the cost of acquisition is C and the amount received is S, where S is higher than C. The gain is S minus C. Tax before surcharge and cess is 30% of that gain. Any applicable surcharge and cess must then be considered.
2. A crypto transfer that produces a loss: If S is lower than C, the difference represents a loss. That loss cannot be set off against other income and cannot be carried forward. It also cannot be used to reduce the gain from another crypto transfer.
3. A transfer subject to TDS: Suppose the payer deducts 1% TDS because the transfer is above the threshold. The deducted amount appears in the taxpayer’s tax statement and may be claimed in the return. It is a credit against tax and is separate from the 30% calculation on the gain.
4. A profitable transfer with TDS: If a transfer produces a gain and is also subject to TDS, the taxpayer calculates the tax on the gain under section 115BBH and checks the TDS credit under section 194S. The TDS can then be claimed in the return to the extent available as a credit.

These examples do not address gifts, airdrops, transfers without a sale price, disputed transaction values or situations involving multiple acquisitions. Those cases require a review of the underlying facts rather than a formula based only on the headline rate.

Reporting crypto in your return

Crypto income is reported in a dedicated schedule for virtual digital assets in the income tax return. The taxpayer should not merge crypto gains or losses into the schedule used for ordinary income. The dedicated section is intended to provide a separate view of the taxpayer’s virtual digital asset activity.

A sensible process begins with collecting transaction records. This includes the cost of acquisition, the date and amount of each transfer, and evidence of any TDS deducted. The records should allow the taxpayer to connect the amount received with the acquisition cost and identify transfers that fall within the TDS threshold.

The next step is to calculate the gain on each applicable transfer. Only the cost of acquisition may be deducted. The resulting gain is reported in the virtual digital asset schedule, with the 30% tax treatment applied under section 115BBH. Surcharge and cess must also be considered where applicable.

TDS should be checked separately in the tax statement. The taxpayer can claim the TDS credit in the return. A transfer may therefore affect both the capital gains calculation and the TDS credit, but the two should not be confused with one another.

The figures in the dedicated schedule and the TDS credit should be reconciled before filing. If the exchange records, wallet records, payment records and tax statement do not agree, the taxpayer should investigate the difference rather than filing an unsupported figure. Professional help may be appropriate where the records are incomplete or the transactions are complex.

Gifts, airdrops and other cases

Gifts and airdrops should not automatically be treated as ordinary crypto transfers simply because they involve receiving an asset. Their tax treatment can depend on the nature of the receipt, whether there is a disposal or transfer, the value involved and the evidence available. The gain rule under section 115BBH should not be applied mechanically without first identifying the correct facts.

A recipient should therefore distinguish between an asset received and later transferred, and an asset received without a corresponding transfer at the time of receipt. The records should explain how the asset was acquired, what was paid for it, and what happened when it was later disposed of or transferred.

Other situations may also require specific review. These include transfers between wallets, transfers to or from another person, transfers without a visible market value, and cases where the payer and recipient disagree about the transaction value. A general description of the activity is not enough; the underlying records matter.

Because gifts, airdrops and unusual transfers may involve questions that extend beyond the simple gain calculation, taxpayers should obtain professional tax advice when the treatment is uncertain.

Getting it right

Good tax compliance starts with accurate records and a clear understanding of which rules apply to each transaction. The following checklist can help:

• Keep acquisition evidence: Record the cost of acquisition for every virtual digital asset included in the calculation.
• Record every transfer: Note the date, asset, amount received and the transaction reference available.
• Separate gains from TDS: Calculate the gain tax under section 115BBH and verify the TDS credit under section 194S independently.
• Apply the threshold correctly: Check whether the 1% TDS applies to the transfer before treating it as a TDS transaction.
• Do not offset losses: Do not reduce other income with a crypto loss and do not carry that loss forward.
• Use the correct schedule: Report crypto activity in the dedicated schedule for virtual digital assets.
• Check the tax statement: Match the TDS shown there with the credit claimed in the return.
• Check the final figures: Include applicable surcharge and cess rather than assuming the complete charge is always the headline rate.

Budget 2026 made no change to the 30% rate or the 1% TDS. Taxpayers should use the current rules, preserve transaction-level evidence and review unusual cases with a qualified professional before filing.