Crypto Tax in India: The 30% Plus 1% TDS Trap Nobody Warned You About

The year your exchange starts filing your numbers for you#

Until now the tax department mostly found out about your crypto because you told it. That arrangement is ending.

Since 1 April 2026, Section 509 of the Income-tax Act, 2025 has obliged crypto exchanges, brokers and trading platforms to file statements of their users' transactions with the department. The CBDT published its guidance note in late July 2026, and the machinery sits in Rules 241 to 244 of the Income-tax Rules, 2026, with Form 167 as the return. The first statements, covering calendar year 2026, are due by 31 May 2027. A platform that files late pays Rs 200 a day; one that files wrong information and does not correct it pays Rs 50,000.

Those penalties fall on the platform, not on you. What reaches you is the consequence of the data.

The department has already shown what it does with such data. Its NUDGE campaign matched exchange filings against returns and produced more than 44,000 communications to people who had traded and not declared, alongside Rs 888.82 crore of undisclosed income found through search operations and data analysis.

The rates, meanwhile, have not moved. The Union Budget of 1 February 2026 left the 30% charge and the 1% deduction exactly where they were. So the question for this year is not whether the rules will soften. It is whether you understand what they already do to your money.

What the law taxes, in plain words#

Two provisions do almost all the work.

The first is the charge. Income from transferring a virtual digital asset is taxed at a flat 30%, plus surcharge and cess. A virtual digital asset, or VDA, is the tax code's term for cryptocurrencies and notified NFTs; the rupee, foreign currency and the RBI's digital rupee are excluded. "Transfer" is a good deal wider than "sell". Swapping Bitcoin for Ethereum is a transfer. Paying a freelancer in USDT is a transfer. There need be no rupee anywhere in the trade.

Only one deduction is allowed against that income: the cost of acquisition. Exchange fees, gas fees, internet bills, advisory charges and hardware all fall outside it. Surcharge and the 4% cess ride on top, and VDA income does not share the 15% surcharge ceiling that listed-equity gains enjoy. At the highest band the 30% headline works out to about 39% in the new regime and close to 43% in the old one, which is arithmetic rather than a separate rule.

The second provision is the collection mechanism. One per cent is deducted at source on the consideration paid for a VDA transfer. The threshold is Rs 50,000 a year for individuals and Hindu Undivided Families below the audit limits, Rs 10,000 for everyone else, and the rate rises to 20% where no PAN is given.

For income earned from 1 April 2026 these same rules carry new numbers. The 30% charge now sits in Section 194 of the Income-tax Act, 2025 and the deduction in Section 393(1), Table Serial 8(vi). The return you are filing this year, for FY 2025-26, still runs on the 1961 Act's Sections 115BBH and 194S. The wording is the same. Only the labels changed.

The 1% that is not a tax at all#

TDS is the most misread line in the regime, because the name invites you to treat it as the bill.

It is not a levy on profit. It is an advance against your final liability, taken from the gross sale value whether you made money or lost it. Sell Rs 1,00,000 of Bitcoin you bought for Rs 1,20,000 and Rs 1,000 still goes to the government on a losing trade.

The arithmetic turns uncomfortable when you trade often. Start with Rs 5,00,000 and turn the book over twenty times in a year, and your sell-side consideration is Rs 1 crore. The deduction is Rs 1,00,000, a fifth of your entire capital, parked with the government until you file and claim it. On a strategy earning 2% a trade, the deduction eats half the gross margin.

Who deducts depends on where you trade. On a domestic exchange the platform usually handles it under a written agreement. In a peer-to-peer or over-the-counter deal the buyer must deduct, and a buyer who is a specified person deposits the money with a challan-cum-statement in Form 26QE within 30 days of the month's end. A specified person here means an individual or HUF with no business income, or with turnover under Rs 1 crore in business or Rs 50 lakh in a profession, which covers most salaried buyers. Plenty of them have no idea the duty is theirs.

Coin-to-coin swaps are the awkward case. Both sides are buyers, both are sellers, and under CBDT Circular 13 of 22 June 2022 the exchange may withhold the tax in kind and liquidate it the same day.

The money does come back. You claim the credit in your return, and if your liability is lower you get a refund. But a deduction made in April 2026 returns, at the earliest, after you file in mid-2027.

Why a flat year still costs you Rs 31,200#

The provision that catches honest investors is the one on losses.

A loss on a VDA transfer cannot be set off against any other income and cannot be carried forward. The Finance Bill introduced in February 2022 was drafted more kindly; the government amended it the following month. Answering Karti Chidambaram in the Lok Sabha on 21 March 2022, Minister of State for Finance Pankaj Chaudhary confirmed that "loss from the transfer of VDA will not be allowed to be set off against the income arising from transfer of another VDA".

Work it through. You make Rs 1,00,000 on Solana and lose Rs 1,00,000 on Dogecoin in the same year. Your economic position is exactly where it started. Your tax is 30% of Rs 1,00,000 plus 4% cess, which is Rs 31,200, payable out of capital.

The same reply dealt with miners: infrastructure cost incurred in mining a VDA is capital expenditure and is not treated as cost of acquisition. A miner who spends Rs 4,00,000 on rigs and power to produce coins worth Rs 5,00,000 is taxed on the full Rs 5,00,000.

Crypto received as a gift lands somewhere else again. It is taxed as income from other sources at slab rates once the value crosses Rs 50,000, and the 30% charge then applies when the recipient sells, on the gain above that already-taxed value.

The reliefs that apply to shares and stop at the door#

Most readers already know the equity rules, which makes the contrast useful.

Long-term gains on listed shares get Rs 1.25 lakh of exemption every year before tax begins. VDA gains get nothing of the sort, and there is no holding period at all: one day or five years, the rate is 30%.

Two further gaps are easy to miss. Sections 111A and 112A each carry a proviso letting a resident whose income other than those gains falls below the maximum amount not chargeable to tax reduce the gains by the shortfall. The VDA charging section carries no such proviso, so the exemption limit does not shelter crypto income. That first point rests on statutory silence rather than on any departmental ruling, so it is worth paying a professional to check it against your own facts. The second is express: since the Finance Act 2025, under the new regime the Section 87A rebate is tested on total income excluding special-rate income and cannot be set against it. Between them, someone with Rs 3,00,000 of crypto gains and no other income can owe tax where someone with Rs 3,00,000 of salary owes none.

Advance tax applies as normal. If your liability after TDS credit is Rs 10,000 or more for the year, it falls due in instalments, with interest on shortfalls.

What the state collects, and what it is missing#

Direct tax collected from the crypto regime, by financial year
(Rs crore, figures given by the Ministry of Finance in Parliament)

1% TDS on transfers
FY 2022-23   ███████████████                           221.27
FY 2023-24   ████████████████████████                  362.70
FY 2024-25   ██████████████████████████████████        511.83

30% tax on VDA income
FY 2022-23   ██████████████████                        269.09
FY 2023-24   █████████████████████████████             437.43
FY 2024-25   not disclosed
             └─────────┴─────────┴─────────┴─────────┘
             0         150       300       450       600   Rs crore

TDS figures from the Finance Ministry's reply in Parliament, reported by Business Today on 9 December 2025; the 30% collection figures from the Minister of State for Finance's Lok Sabha reply of 21 July 2025. Maharashtra alone accounted for Rs 293.40 crore of the FY 2024-25 TDS, Karnataka Rs 133.94 crore.

Rs 1,095.80 crore of TDS over three years is a thin harvest for a country Chainalysis ranks first in the world on grassroots crypto adoption. The reason is not obscure. Industry research compiled in the TIOL-TKF report puts about 91.5% of Indian trading volume on offshore platforms by October 2025, with roughly Rs 11,000 crore of TDS never collected since the levy began in July 2022. Those are estimates rather than official statistics. They point the same way as the government's own account: replying to Rajya Sabha Unstarred Question 1171 on 10 February 2026, the ministry said VDAs are pseudonymous, borderless and instantly transferable, and that reliance on "offshore exchanges, private wallets and decentralised platforms" makes the income hard to detect.

The answer so far has been enforcement rather than lower rates. Since 1 February 2025, undisclosed VDAs fall within the block assessment scheme for search cases, where undisclosed income is taxed at 60% with a penalty of up to half that tax again. From April 2027 India is due to start exchanging data under the OECD's Crypto-Asset Reporting Framework, which brings foreign platforms into the department's field of vision.

Using an offshore app does not shrink the liability. It removes the deduction that would have been credited against it, and leaves the whole amount for you to pay.

Key takeaways#

The 1% TDS is not the tax. It is an advance against the 30%, taken from gross sale value even on a losing trade, and refundable only after you file.
Gains and losses do not net off. A flat year across two coins can still produce a real bill, because losses cannot be set against other VDA gains or carried forward.
Cost of acquisition is the only deduction. Exchange fees, gas fees, electricity and mining rigs are all outside it.
None of the equity reliefs apply here: no Rs 1.25 lakh exemption, no holding-period benefit, no basic exemption shelter, and no Section 87A rebate against this income in the new regime.
Platform reporting began on 1 April 2026 under Section 509, with the first statements due 31 May 2027 and OECD data exchange expected from April 2027.

Frequently asked questions#

I only swapped one coin for another and never took out rupees. Is that taxable? Yes. A swap is a transfer. The gain is computed in rupee terms on the date of the swap, and both sides of the trade can attract TDS.

Can I claim the TDS back if I made an overall loss? Yes. The deduction is a credit in your return, and if your final liability is lower, the balance comes back as a refund after filing and processing.

Is there a minimum below which crypto gains are exempt? No. The 30% applies from the first rupee of gain. The Rs 50,000 and Rs 10,000 figures are TDS thresholds, not exemptions.

What if crypto profit is my only income and it is small? It is still taxed at 30%. The basic exemption limit does not shelter it, and in the new regime the Section 87A rebate cannot be set against special-rate income either.

I used an offshore exchange that deducted nothing. What now? The liability is identical, and with no TDS credit the whole amount falls due from you. Report it in Schedule VDA; an updated return is the route for earlier years.

Does the tax apply to airdrops and staking rewards? Receiving them is income in your hands at the time of receipt, valued in rupees, and selling them later attracts the 30% charge on the gain. Treatment varies with the facts, so check your own case.

Are the rules likely to be relaxed? The industry asked for loss set-off and a lower TDS before the 2026 Budget and got neither. No relaxation has been announced since.

Glossary#

Virtual digital asset (VDA). The tax code's term for cryptocurrencies and notified NFTs. It excludes the rupee, foreign currency and the RBI's digital rupee.

Transfer. Any disposal, including a sale, a swap of one coin for another, or payment for goods. It is the trigger for the 30% charge.

Cost of acquisition. What you paid to acquire the asset, and the only amount deductible from VDA sale proceeds.

TDS. Tax deducted at source. For crypto, 1% of the sale consideration, withheld by the buyer or the platform and credited against your final bill.

Form 26QE. The challan-cum-statement a specified person uses to deposit TDS on a VDA purchase, due within 30 days of the month's end.

Schedule VDA. The part of the income tax return where crypto transactions are declared, one transaction at a time.

Block assessment. The regime for search cases, covering six preceding assessment years, in which undisclosed income is taxed at 60% plus penalty.

CARF. The OECD's Crypto-Asset Reporting Framework, an automatic exchange of crypto account data between tax authorities, which India plans to join from April 2027.

References#

Income Tax Department, Taxation of virtual digital asset (VDA)
Income Tax Department, Section 115BBH, Income-tax Act, 1961
Income Tax Department, Section 112A, Income-tax Act, 1961
Income Tax Department, TDS on payment for the transfer of virtual digital assets, including CBDT Circular 13 of 22 June 2022
Income Tax Department, Section 509, Income-tax Act, 2025
Income Tax Department, Schedule VDA
The Federal, Crypto losses cannot be used for set-off, says Finance Ministry, 22 March 2022, reporting the Lok Sabha reply of the Minister of State for Finance of 21 March 2022
MediaNama, Government admits no real-time tracking of crypto transactions, 21 July 2025, reporting Section 115BBH collections
TaxGuru, Government flags challenges in taxation of virtual digital assets, reporting Rajya Sabha Unstarred Question No. 1171, 10 February 2026
Business Today, Crypto TDS collections cross Rs 1,000 crore in three years, 9 December 2025
Crypto Briefing, India's income tax department issues 44,000 VDA tax notices
Outlook Business, India's new crypto reporting rules explained
CoinDesk, Budget 2026 keeps crypto taxes and TDS unchanged, adds penalty for lapses, 2 February 2026
TDSMAN, TDS on virtual digital assets under Section 393(1) of the Income-tax Act, 2025, May 2026
CAclubindia, Virtual digital assets now classified as undisclosed income under the Income Tax Act
TaxGuru, Rebate rules and STCG under Section 111A in the new regime, FY 2025-26
KoinX, India crypto offshore trading statistics, compiling the TIOL-TKF Report on Taxation of Digital Assets, November 2025
Business Standard, India to implement OECD's crypto reporting framework from April 2027, 31 August 2025
Chainalysis, 2025 Global Crypto Adoption Index
Google Ads search volumes for India, retrieved through DataForSEO, 29 September 2026

This article is journalism, not investment, tax or legal advice. Crypto assets are not regulated as investment products in India and can lose their entire value. Tax positions turn on individual facts. Verify the current rules and consult a qualified professional before acting.