Understanding India’s Crypto Tax Framework
India’s approach to Virtual Digital Asset (VDA) taxation is one of the world’s strictest, with a flat 30% tax on all profits regardless of your income bracket or holding period. If you trade or hold crypto in India or hold assets on foreign exchanges as a resident, you must comply with Schedule VDA reporting in your ITR. This guide covers the 2026 rules, recent changes from the April 2026 Income Tax Act update, and what you need to know to stay compliant.
The 30% Flat Tax and TDS Structure
Under Section 115BBH, the Income Tax Act treats crypto profits as a special category with a fixed 30% tax rate. This applies to all Virtual Digital Asset transfers—whether you’re trading on an Indian exchange, moving crypto between wallets, or selling on a foreign platform. The tax is calculated before the 4% education cess and applicable surcharges (which depend on your income slab), meaning the effective rate can reach 31%–32% or higher for higher-income filers.
In addition to income tax, a 1% Tax Deducted at Source (TDS) applies on crypto transfers exceeding ₹10,000. This is an important distinction: the 1% is deducted at the point of transfer (if your exchange or wallet provider has TDS obligations), while the 30% income tax is calculated at year-end on your total profit.
For those trading on foreign exchanges, TDS is typically not deducted, so you must self-assess, file your ITR with Schedule VDA, and potentially pay advance tax to avoid penalties.
Schedule VDA: Line-by-Line Reporting Requirement
From 1 April 2026, India’s Income Tax Act 2025 introduced stricter disclosure rules. Every single VDA transaction—buy, sell, swap, conversion—must now be reported in Schedule VDA. You cannot simply report net gains at year-end; the tax authority now expects a complete transaction history.
Which ITR form do I use?
- ITR-2: For salaried individuals or those with income from other sources who trade crypto
- ITR-3: For business owners or professionals with crypto trading as part of their business income
In Schedule VDA, you will enter for each transaction:
- Acquisition date
- Transfer/sale date
- Cost of acquisition (purchase price)
- Consideration (sale price or transfer value)
- Resulting income (taxable profit for that transaction)
Critical Limitation: No Loss Set-Off
One of India’s harshest tax rules is the prohibition on loss set-off. Losses from Virtual Digital Assets cannot be carried forward or offset against:
- Income from other sources (salary, business, investments)
- Gains from other crypto assets
This means if you make ₹5 lakhs profit on Bitcoin and ₹2 lakhs loss on Ethereum, you cannot net these. You must pay 30% tax on the full ₹5 lakhs Bitcoin gain, and the Ethereum loss simply disappears for tax purposes.
Allowable Deductions and Cost Basis
The only deduction allowed is your cost of acquisition (the purchase price of the asset). Unfortunately, India’s tax framework does NOT allow deductions for:
- Gas fees or blockchain transaction costs
- Exchange commissions or trading fees
- Brokerage costs
- Mining or staking expenses
This significantly increases your taxable gains if you factor in these transaction costs, so careful record-keeping of your cost basis is critical.
Foreign Holdings and CARF Compliance
If you hold crypto on foreign exchanges or wallets, you must still report this in Schedule FA (Foreign Assets) with no minimum value exemption. Income earned through foreign platforms is fully taxable under Section 115BBH, the same as domestic exchanges.
Looking ahead, from 1 April 2027, India is expected to join CARF (Common Reporting Standard for Automatic Exchange of Crypto Account Information), a global framework that will automatically share crypto account information between countries. This means the tax authority will increasingly have visibility into foreign exchange holdings.
April 2026 Changes and Penalties
The updated Income Tax Act 2025, effective 1 April 2026, introduced tougher compliance requirements:
Line-by-line reporting: You must now report every transaction, not net gains. This creates a much larger paper trail for tax authorities to audit.
Penalty structure: Inaccurate reporting of crypto transactions now faces:
- ₹200 per day penalty for filing errors
- Up to ₹50,000 for serious or repeated lapses
These penalties are in addition to interest on unpaid taxes, making it crucial to file correctly the first time.
Bottom Line
India’s crypto tax regime treats VDAs as a high-tax asset class with strict reporting requirements. The 30% flat rate, combined with the no-loss-set-off rule and mandatory line-by-line disclosure from April 2026, means careful transaction tracking and timely ITR filing are non-negotiable. If you’re trading or holding crypto in India, start organizing your transaction records now: acquisition dates, costs, disposal dates, and proceeds. Consider using a dedicated crypto tax tool that integrates with your exchanges to ensure accurate Schedule VDA reporting. The penalty structure and automatic information exchange via CARF will make it increasingly difficult to under-report, so proactive compliance is the most prudent approach.
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Sources and review
This article was checked against the primary or authoritative sources below .
- Crypto Tax India 2026: 30% VDA Tax, 1% TDS & ITR Guide — India Policy Hub
- Schedule VDA Filing Guide India 2026 — Richify
- Crypto Tax India 2026: Complete Guide — TaxFetch India
- Crypto Tax in India 2026: 30% Tax, TDS & ITR — CoinDCX
Frequently asked questions
All VDA profits are taxed at a flat 30% regardless of income slab, plus a 4% cess and applicable surcharges under Section 115BBH.
Schedule VDA is where you report crypto transactions. Salaried individuals with VDA activity use ITR-2; those with business/professional income use ITR-3. Every trade must be disclosed line-by-line.
No. Losses from VDAs cannot offset other income types, nor can losses from one crypto asset offset gains from another crypto asset.
A 1% Tax Deducted at Source applies on crypto transfers exceeding ₹10,000. Since foreign exchanges don't deduct TDS under Section 194S, you must self-assess and pay advance tax.
From 1 April 2026, the Income Tax Act 2025 requires reporting every trade, conversion, and disposal—not just net gains. Inaccurate reporting now faces fines of ₹200/day up to ₹50,000 for serious lapses.
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