India’s tax treatment of virtual digital assets (VDAs) is strict, mechanical and unforgiving of shortcuts. The rules themselves have been stable since 2022, but the reporting requirements for assessment year 2026-27 are tighter than many holders expect, and the penalties for getting them wrong have grown. This guide covers what you owe, what you report, and where filings most often go wrong.
None of this is tax advice for an individual situation. It is a map of the rules so you can file accurately or brief a chartered accountant with the right questions.
The two taxes that apply
Crypto in India faces two separate charges, and they work differently.
The first is a flat 30% tax on gains under Section 115BBH, plus a 4% health and education cess and any applicable surcharge. This rate is the same whether you earn ₹5 lakh or ₹50 lakh a year — there is no slab benefit and no basic exemption for VDA gains. The tax is triggered only when you transfer the asset by selling, swapping one token for another, or spending it. Simply holding is not a taxable event.
The second is a 1% TDS deducted at source on transfers. It applies once your transfers cross ₹10,000 in a financial year, or ₹50,000 for specified persons. Indian exchanges deduct it automatically; if you transact peer-to-peer or on a foreign platform, the obligation can fall on you. TDS is not an extra tax — it is a prepayment you reconcile against your final liability — but it is the primary way the department tracks crypto activity.
What you can and cannot deduct
This is where the 30% regime is harsher than ordinary capital gains:
- Only the cost of acquisition is deductible. Trading fees, gas costs, software subscriptions and interest are not.
- Losses cannot be set off. A loss on one token cannot offset a gain on another token, cannot offset other income, and cannot be carried forward to a future year.
- Each disposal is taxed on its own gain. A profitable trade and a losing trade in the same year are not netted.
The practical effect is that active traders can owe tax on gross winning trades even in a year that was flat or negative overall. Model your liability trade by trade, not on your net portfolio change.
Reporting: Schedule VDA and Schedule FA
The return itself is where most filing errors occur.
VDA income is reported in Schedule VDA, which appears in both ITR-2 and ITR-3. Most retail holders use ITR-2; those treating crypto as business income use ITR-3. The critical detail for AY 2026-27 is that Schedule VDA expects transaction-wise disclosure — date of acquisition, date of transfer, cost and consideration for each disposal — not a single aggregate number. Reconciling this against every TDS entry in your Annual Information Statement (AIS) is effectively non-negotiable, because mismatches are an easy trigger for a notice.
If you held crypto on a foreign exchange or custodial wallet at any point during the calendar year and you are resident and ordinarily resident, you must also complete Schedule FA. This is separate from, and in addition to, taxing the gains in Schedule VDA. Where foreign holdings are involved, non-disclosure is not a minor omission: it falls under the Black Money Act, which carries far heavier penalties than ordinary under-reporting.
| Requirement | Where it goes | Applies when |
|---|---|---|
| 30% tax on gains | Schedule VDA (ITR-2 / ITR-3) | Any transfer of a VDA |
| 1% TDS reconciliation | AIS vs Schedule VDA | Transfers over ₹10,000 (₹50,000 for specified persons) |
| Foreign holdings | Schedule FA | Resident and ordinarily resident holding crypto abroad |
Deadlines and penalties for AY 2026-27
For most retail traders (non-audit cases), the ITR due date for AY 2026-27 is 31 July 2027. Late filing draws a fee of ₹1,000 to ₹5,000 under Section 234F, plus 1% per month interest on unpaid tax under Section 234A.
Compliance pressure has increased on both sides of the transaction. From 1 April 2026, exchanges face fines for reporting failures. For individuals, the general penalty for under-reporting income is 50% of the tax involved, rising to 200% for deliberate misreporting — and, again, foreign-asset non-disclosure is handled under the stricter Black Money Act rather than these ordinary provisions.
A filing checklist
Before you submit, confirm:
- You have downloaded and read your full AIS, and every exchange TDS entry matches a line in Schedule VDA.
- Each disposal is entered with its own dates, cost and consideration — not aggregated.
- You have applied only the cost of acquisition, with no fees or losses set off.
- You have added the 4% cess (and surcharge if applicable) to the 30% base.
- If you used any foreign platform, Schedule FA is complete.
- You are on the correct form — ITR-2 for most holders, ITR-3 for business income.
Bottom line
India’s crypto tax is simple in its rate and strict in its mechanics. The 30% charge plus cess is fixed, losses do not help you, and the reporting burden — transaction-wise Schedule VDA entries, AIS reconciliation and Schedule FA for anything held abroad — is where filings succeed or fail. With penalties for under-reporting now at 50% to 200% and foreign non-disclosure sitting under the Black Money Act, the margin for casual filing has narrowed.
Keep a per-trade record through the year, reconcile it against your AIS before you file, and treat foreign-held crypto as a disclosure obligation in its own right.
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Sources and review
This article was checked against the primary or authoritative sources below .
- ITR Crypto Reporting India AY 2026-27: Where and How to Report Crypto — Cryptact
- Crypto Tax in India 2026 – 30% Tax, 1% TDS and ITR Filing — Unocoin
- Crypto Taxes India 2026 Guide: Tax Rules, ITR File, RBI — ZebPay
- Crypto and VDA Tax Filing in India: ITR Guide AY 2026-27 — All India ITR
- Crypto Taxes in India — CoinDCX
Frequently asked questions
Gains on virtual digital assets are taxed at a flat 30% under Section 115BBH, plus a 4% health and education cess and any applicable surcharge. The rate does not depend on your income tax slab, and there is no basic exemption limit for VDA gains.
A 1% TDS applies to crypto transfers once they cross ₹10,000 in a financial year, or ₹50,000 for specified persons. It is deducted at the point of transfer and appears in your AIS, which you must reconcile against every exchange entry.
Most crypto holders file ITR-2, or ITR-3 if crypto is treated as business income. Both contain Schedule VDA, where VDA income is disclosed transaction by transaction rather than as a single aggregate figure.
Yes. If you are resident and ordinarily resident and held crypto on a foreign platform at any time during the year, you disclose it in Schedule FA in addition to taxing the gains in Schedule VDA. Non-disclosure of foreign assets carries penalties under the Black Money Act.
No. Losses on one VDA cannot be set off against gains on another VDA, against other income, or carried forward. Only the cost of acquisition is deductible; trading fees and other expenses are not.
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