The short answer
- Profit from selling, swapping or spending crypto is taxed at a flat 30%, plus 4% cess, whatever your income slab.
- Exchanges deduct 1% TDS on sales. You get this back as a credit when you file.
- You can deduct only what you paid for the coin. Losses can't be set off against gains on other coins or any other income, and can't be carried forward.
- You report crypto in Schedule VDA of your income tax return.
- Budget 2026 kept all of this unchanged and added new penalties for incorrect crypto reporting from 1 April 2026.
India taxes crypto more heavily than almost any other major economy. That surprises a lot of first-time investors, usually around July, when they sit down to file and find that a year of small trades has turned into a tax bill even though their portfolio is down. This guide explains how the rules work, using worked examples in rupees, so that doesn't happen to you.
We explain how the law works. We are not your tax adviser. If your situation is unusual, such as large volumes, business income from crypto, or income from abroad, talk to a chartered accountant.
What counts as crypto for tax purposes
Indian tax law calls crypto a virtual digital asset (VDA). The definition is broad. It covers cryptocurrencies like Bitcoin and Ether, stablecoins like USDT, and NFTs. If it's a token that's bought, sold or swapped, assume it's a VDA.
From 1 April 2026, India's new Income-tax Act, 2025 replaced the 1961 Act. Section numbers changed, but the crypto rules carried over unchanged, and the Union Budget presented on 1 February 2026 left the rates alone.
The 30% tax: how it's calculated
When you transfer a VDA, you pay 30% on the gain. Transfer means more than selling for rupees. It includes:
- selling crypto for INR
- swapping one coin for another, such as BTC for USDT
- spending crypto on goods or services
The gain is simple: sale value minus cost of acquisition. That's the only deduction allowed. Exchange fees, internet costs and the interest on money you borrowed to invest can't be deducted.
On top of 30%, you pay 4% health and education cess, which brings the rate to 31.2%. Surcharge applies at higher income levels.
Worked example
Priya buys ₹1,00,000 of Ether in May. In November she sells it for ₹1,40,000.
- Gain: ₹1,40,000 − ₹1,00,000 = ₹40,000
- Tax at 30%: ₹12,000
- Cess at 4% of the tax: ₹480
- Total: ₹12,480
Her salary slab doesn't matter. Even if her other income is below the taxable limit, the 30% applies to this gain.
Why losses hurt so much
This is the rule that catches people out. A loss on one VDA can't be set off against a gain on another VDA, or against any other income. You also can't carry it forward to next year.
Priya's friend Arjun makes ₹50,000 on Solana and loses ₹50,000 on a meme coin in the same year. Overall he's at zero. But he still owes 30% on the ₹50,000 Solana gain, about ₹15,600 with cess, because the meme coin loss counts for nothing.
If you trade actively, this one rule matters more than anything else in this guide. Every winning trade is taxed, and every losing trade is ignored.
The 1% TDS
When you sell, the exchange deducts 1% of the sale value as tax deducted at source (TDS) and pays it to the government on your behalf. On a ₹1,40,000 sale, that's ₹1,400.
- TDS is on the sale value, not the profit. You pay it even when you sell at a loss.
- For most individual investors, it applies once total sales in a financial year cross ₹50,000. A lower ₹10,000 threshold applies to some taxpayers, such as those with business income who need audited accounts.
- It's not an extra tax. It shows up in your Form 26AS and Annual Information Statement (AIS), and you claim it as a credit against your final tax bill. If you've overpaid, it comes back as a refund.
TDS also gives the tax department a record of every sale made on an Indian or FIU-registered exchange. Assume they can see your trades.
Gifts, airdrops, staking and mining
- Gifts: crypto received as a gift is taxable for the person receiving it if its value is over ₹50,000 in a year, unless it comes from a relative as defined in the law, or on occasions like your wedding.
- Airdrops, staking and mining rewards: these are commonly treated as income when you receive them, taxed at your slab rate, with 30% applying later when you sell. The law is less clear here, so get a CA's view if the amounts are meaningful.
How to report crypto in your return
- Download your tax reports from every exchange you used. Most Indian exchanges and FIU-registered global exchanges offer an annual P&L or tax statement.
- Match your TDS. Compare what the exchanges say they deducted with your Form 26AS and AIS on the income tax portal.
- Fill in Schedule VDA in ITR-2, or ITR-3 if crypto is part of a business. List each transfer with its date of acquisition, date of transfer, cost and sale value.
- Claim the TDS credit so the 1% already paid is counted.
If you have hundreds of trades across several exchanges, a crypto tax tool saves hours. Koinly imports trades from most Indian and global exchanges and produces a report laid out for Schedule VDA. It's a paid tool for larger volumes. Check whether you actually need it before you pay.
What changed in Budget 2026
The industry asked for lower TDS and permission to offset losses. Neither happened. Budget 2026 kept the 30% tax and the 1% TDS, and it still allows no deduction except the cost of acquisition.
Two things did change:
- New reporting penalties took effect on 1 April 2026. Failing to file a required crypto transaction statement costs ₹200 a day. Filing inaccurate information, or failing to correct it, carries a flat ₹50,000 penalty.
- Lighter criminal liability for TDS defaults. The maximum prison term for TDS defaults dropped from seven years to two, and courts can now convert sentences into fines.
Budget 2025 had already brought undisclosed crypto income under the block assessment rules. These let the tax department reopen up to 48 months of returns and charge a penalty of up to 70% of the unpaid tax. Underreporting crypto is now an expensive mistake.
Offshore exchanges aren't a way around this. Indian tax residents owe tax on gains wherever they trade. Exchanges that serve Indian users must register with the Financial Intelligence Unit (FIU-IND), and in early 2024 the government blocked websites of several offshore exchanges that hadn't.
Four habits that make tax time easy
- Trade less. Because losses don't offset gains, frequent trading usually costs more tax than buying and holding.
- Keep records as you go. Download statements every quarter, not once in July.
- Use FIU-registered exchanges so TDS is handled correctly and your records match the department's.
- Set aside 31.2% of every gain as soon as you sell, so the tax bill isn't a surprise.
Not financial advice. This guide explains how Indian crypto tax works as of the date shown above. Tax rules change, and your situation may be different. For anything beyond simple buying and selling, consult a chartered accountant.
Sources: Income Tax Department e-filing portal; Decrypt, Budget 2026 coverage (2 February 2026); Financial Intelligence Unit – India.