india-crypto-tax

India Crypto / Virtual Digital Assets Tax Skill v1.0

Verified rates & thresholds (accountant-reviewed)

Reviewed against the cited tax authorities by Mayur Deokar on 2026-06-06. Items flagged for further clarification are tracked separately and excluded here. This block is generated from verified skill_facts — edit the facts, not the prose.

Crypto (VDA)

• Health & Education Cess — 4% on tax (Finance Act)
• Rate (ITA 2025 replacement) — New section as per new Income Tax Act 2025 applicable from financial year fy 2026-27 is Section 393(1). Rate remains same. (ITA s 194S)
• Threshold (general) — ₹10,000 aggregate per FY (ITA s 194S)
• Threshold (specified persons) — ₹50,000 (individual/HUF with turnover ≤ ₹1 Cr) (ITA s 194S)
• Form — Form 26QE (→ Form 141 under ITA 2025) (CBDT)
• Deductible — Purchase price only (ITA s 115BBH(2))
• Mined/staked/airdrop tokens — Cost = ₹0 (ITA s 115BBH)
• ITR form — ITR-2 or ITR-3 with Schedule VDA (CBDT notification)
• Deadline — 31 July (non-audit) / 31 October (audit) (ITA s 139)
• Flat rate on VDA gains — 30% (s 115BBH) (ITA s 115BBH)
• Effective rate (before surcharge) — 31.20% (Calculated)
• Loss offset — NOT permitted — crypto losses cannot offset ANY income (ITA s 115BBH(2))
• Loss carry-forward — NOT permitted (ITA s 115BBH)
• TDS on VDA Transfer (s 194S) — Rate — 1% of consideration (rate unchanged); citation updated to Section 393(1) of the new Income Tax Act 2025, applicable from FY 2026-27 (ITA s 194S; new Income Tax Act 2025 s 393(1))
• TDS Threshold (general) — ₹10,000 aggregate per FY (ITA s 194S)
• TDS Threshold (specified persons) — ₹50,000 (individual/HUF with turnover ≤ ₹1 Cr) (ITA s 194S)
• Form — Form 26QE (→ Form 141 under ITA 2025) (CBDT)
• Cost of Acquisition — Deductible — Purchase price only (ITA s 115BBH(2))
• Cost of improvement — NOT deductible (ITA s 115BBH(2)(a))
• Transfer expenses (fees, gas) — NOT deductible (ITA s 115BBH)
• Mined/staked/airdrop tokens cost basis — Cost = ₹0 (ITA s 115BBH)
• ITR form — ITR-2 or ITR-3 with Schedule VDA (CBDT notification)
• Deadline — 31 July (non-audit) / 31 October (audit) (ITA s 139)

Section 1 — Quick Reference

Quick Reference table

Field	Value
Country	India (Republic of India)
Tax	Income Tax on Virtual Digital Assets (VDA)
Currency	INR (Indian Rupee) — all values in INR
Tax year (Assessment Year)	Financial Year 1 April – 31 March (FY 2025-26 = 1 Apr 2025 – 31 Mar 2026; AY 2026-27)
Primary legislation	Income Tax Act, 1961: Section 2(47A) (VDA definition), Section 115BBH (flat 30% tax), Section 194S (1% TDS); Finance Act, 2022 (amendments effective 1 April 2022 / 1 July 2022)
Replacement under ITA 2025	Income-tax Act, 2025: Section 393(1) Sl. No. 8(vi) replaces Section 194S for TDS
Tax authority	Central Board of Direct Taxes (CBDT); Income Tax Department
Filing portal	incometax.gov.in (e-filing portal)
Tax rate on VDA gains	Flat 30% (plus 4% health & education cess = effective 31.2%)
Surcharge	Applicable based on total income slab (10%–37%) on the 30%
TDS rate	1% on consideration for transfer of VDA (Section 194S)
TDS threshold	₹10,000 (general) / ₹50,000 (specified persons — individuals/HUF with turnover ≤ ₹1 crore or profession receipts ≤ ₹50 lakh)
Loss offset	NOT PERMITTED — crypto losses cannot be set off against ANY income
Loss carry-forward	NOT PERMITTED
Reporting form	ITR-2 or ITR-3 with Schedule VDA
Filing deadline	31 July of the assessment year (31 July 2026 for FY 2025-26); 31 October for audit cases
Validated by	Pending — requires sign-off by an Indian Chartered Accountant
Skill version	1.0

VDA Definition (Section 2(47A) / Income-tax Act, 2025 S. 2(57))

VDA Definition table

Category	Included
(a) Cryptographic tokens	Any information, code, number, or token generated through cryptographic means providing a digital representation of value — includes BTC, ETH, SOL, etc.
(b) NFTs	Non-fungible tokens or any token of similar nature
(c) Central Government notified	Any other digital asset the Central Government may notify
Excluded	Indian currency, foreign currency, CBDCs (Digital Rupee)

Conservative Defaults

Conservative Defaults table

Ambiguity	Default
Unknown cost of acquisition	Zero (maximises gain) — STOP if material
Unknown whether business or investment	Treat as transfer of VDA under 115BBH (30% flat)
Unknown whether mining income or business income	Treat as "income from other sources" (still taxable)
Unknown FMV at receipt	Use exchange price at time of transaction
Gift of VDA — unknown value	Obtain FMV; if ≥ ₹50,000, taxable in hands of recipient

Section 2 — Classification Rules

The 115BBH Regime — No Capital vs Income Distinction

• 115BBH flat rate scope — Unlike most jurisdictions, India does not distinguish between capital gains and income for crypto taxation. Section 115BBH applies a flat 30% tax on any income arising from the transfer of a VDA, regardless of: Holding period (no short-term vs long-term distinction); Frequency of trading; Whether taxpayer is an investor or trader; Whether gain is revenue or capital in nature

Classification Question table

Classification Question	Answer
Is crypto a capital asset in India?	The government treats income from VDA transfer under a special regime (S.115BBH) separate from the regular capital gains provisions
Does holding period matter?	NO — flat 30% regardless of holding period
Does trader vs investor distinction matter?	NO — flat 30% in either case
Can crypto be treated as business income?	Only mining/staking/providing services may be classified as business income or income from other sources; the transfer gain is always 30% under 115BBH

What constitutes a "transfer" under 115BBH

• transfer definition — Sale of VDA for fiat (INR or foreign currency); Exchange of one VDA for another VDA (crypto-to-crypto swap); Use of VDA as payment for goods or services; Gift of VDA (except to specified relatives under Section 56); Any disposal or alienation of VDA

Section 3 — Rate Table

Tax on Transfer of VDA (Section 115BBH)

Tax on Transfer of VDA table

Component	Rate	Source
Base tax on VDA transfer income	30%	S. 115BBH(1)(a)
Health & Education Cess	4% on tax	S. 136C
Effective rate (before surcharge)	31.20%	—

Surcharge (based on total income including VDA)

Surcharge table

Total Income	Surcharge Rate	Effective VDA Tax Rate
Up to ₹50 lakh	Nil	31.20%
₹50 lakh – ₹1 crore	10%	34.32%
₹1 crore – ₹2 crore	15%	35.88%
₹2 crore – ₹5 crore	25%	39.00%
Above ₹5 crore	37%	42.74%

Note: Marginal relief applies at surcharge thresholds.

TDS on Transfer of VDA (Section 194S)

TDS on Transfer of VDA table

Element	Detail
Rate	1% of consideration
Threshold (general)	₹10,000 aggregate in a financial year
Threshold (specified persons)	₹50,000 aggregate (individual/HUF with business turnover ≤ ₹1 crore or profession receipts ≤ ₹50 lakh in preceding year)
Who deducts	Buyer of VDA / exchange platform
When	At time of credit or payment, whichever is earlier
TDS on crypto-to-crypto	Both parties may be liable (buyer of each VDA in the swap)
Form	Form 26QE (now Form 141 under ITA 2025)
Deposit deadline	Within 30 days from end of month of deduction

Section 4 — Cost Basis

Permitted Deductions

Permitted Deductions table

Deductible	Permitted?	Detail
Cost of acquisition	YES	Purchase price of the VDA only
Cost of improvement	NO	Explicitly disallowed under S.115BBH(2)(a)
Transfer expenses	NO	Exchange fees, gas fees — NOT deductible
Any other deduction	NO	No deduction under any section of the Act
Depreciation	NO	Not applicable

This is the harshest cost basis regime globally. Only the original purchase price can be deducted — no fees, no commissions, no gas costs.

Cost Basis Methods

India does not prescribe FIFO/LIFO/average cost for individuals. The Act simply refers to "cost of acquisition." In practice:

Cost Basis Methods table

Method	Status
FIFO	Commonly used by exchanges and software
Average cost	Acceptable in practice
Specific identification	Acceptable if documented
LIFO	Not standard; no prohibition

The key constraint is that only cost of acquisition matters — method of identifying which lot was sold is secondary.

Zero-Cost Scenarios

Zero-Cost Scenarios table

Scenario	Cost of Acquisition
Mined tokens	₹0 (no cost of acquisition; full value is gain)
Staking rewards received	₹0 (if not purchased)
Airdrop tokens	₹0
Hard fork tokens	₹0
Gifted VDA (below ₹50,000)	Cost to the previous owner (for computing S.115BBH gain on subsequent transfer)

Section 5 — DeFi, Staking, Mining, and Airdrops

5.1 Mining

Mining table

Aspect	Treatment
Receipt of mined tokens	Taxable as "income from other sources" or "business income" at applicable slab rates
Cost basis of mined tokens	FMV at time of mining (if taxed as income on receipt) becomes the cost of acquisition for future transfer
Subsequent transfer	30% flat tax under S.115BBH on (proceeds – cost of acquisition)

Note: There is ambiguity on whether mining income is taxed at slab rates (as other income) AND THEN the transfer gain is separately taxed at 30%. Conservative approach: tax as income on receipt, then 30% on disposal gain from that FMV cost basis.

5.2 Staking

Staking table

Aspect	Treatment
Staking rewards received	Income from other sources at FMV on receipt — taxed at slab rates
Cost basis of staking rewards	FMV at receipt date
Subsequent transfer of staked tokens	30% under S.115BBH

5.3 Airdrops

Airdrops table

Scenario	Treatment
Airdrop requiring action	Income at FMV on receipt; slab rates
Unsolicited airdrop	Potentially taxable as income under Section 56(2)(x) if value > ₹50,000
Transfer of airdropped tokens	30% under S.115BBH; cost of acquisition = ₹0 or FMV if already taxed as income

5.4 DeFi Lending/Yield

DeFi Lending/Yield table

Activity	Treatment
Interest/yield from DeFi protocols	Income from other sources; taxed at slab rates
LP token receipt (deposit into pool)	May constitute transfer of VDA — 30% on any gain
LP token withdrawal	Transfer — 30% on gain
Impermanent loss	No explicit relief; loss on VDA transfer cannot offset anything

5.5 Hard Forks

Hard Forks table

Scenario	Treatment
New tokens from hard fork	Cost of acquisition = ₹0
Transfer of forked tokens	30% on full proceeds (zero cost basis)
Original tokens	Cost basis unchanged

Section 6 — NFT Treatment

NFTs are explicitly included in the VDA definition under Section 2(47A)(b).

NFT Treatment table

Event	Treatment
Purchase of NFT	Acquisition — record cost
Sale of NFT	Transfer of VDA — 30% flat tax on gain under S.115BBH
Creation and sale (artist)	If business income: slab rates; if transfer of VDA: 30%
Royalty on secondary sale	Income from other sources; slab rates
NFT-for-NFT swap	Transfer of VDA on both sides — 30% on each gain
Gift of NFT (value > ₹50,000)	Taxable in hands of recipient under S.56(2)(x)
NFT becomes worthless	Loss — cannot be offset or carried forward

Section 7 — Reporting Requirements

7.1 ITR Forms

ITR Forms table

Taxpayer Type	Applicable ITR	Schedule
Individual with salary + VDA income	ITR-2	Schedule VDA
Individual/HUF with business income + VDA	ITR-3	Schedule VDA
Company	ITR-6	Schedule VDA

7.2 Schedule VDA (Virtual Digital Asset)

Schedule VDA requires the following for each VDA transaction:

Schedule VDA fields table

Field	Detail
Type of VDA	Cryptocurrency, NFT, other
Date of transfer	DD/MM/YYYY
Date of acquisition	DD/MM/YYYY
Head of income	Income from transfer of VDA
Cost of acquisition	In INR
Consideration received	In INR
Income from transfer	Gain (consideration – cost)

7.3 TDS Reporting

TDS Reporting table

Form	Purpose	Deadline
Form 26QE / Form 141	TDS on VDA transfer	Within 30 days from end of month
Form 26AS / AIS	Annual Information Statement — reflects TDS deducted	Available on e-filing portal
Form 67	For claiming foreign tax credit (if VDA traded on foreign exchange and tax paid abroad)	Before filing ITR

7.4 Key Deadlines

Key Deadlines table

Deadline	Date (FY 2025-26 / AY 2026-27)
Advance tax — 1st instalment	15 June 2025 (15% of total estimated tax)
Advance tax — 2nd instalment	15 September 2025 (45% cumulative)
Advance tax — 3rd instalment	15 December 2025 (75% cumulative)
Advance tax — 4th instalment	15 March 2026 (100%)
ITR filing deadline (non-audit)	31 July 2026
ITR filing deadline (audit cases)	31 October 2026
Belated return	31 December 2026

Section 8 — Loss Offset and Carry-Forward Rules

The absolute prohibition on loss utilisation

Loss prohibition table

Rule	Detail	Authority
Loss offset against other income	NOT PERMITTED	S. 115BBH(2)(b)
Loss offset against other VDA gains	NOT PERMITTED — loss from one VDA cannot offset gain from another VDA	S. 115BBH(2)(b)
Loss carry-forward	NOT PERMITTED	S. 115BBH(2)(b)
Loss from other heads against VDA income	NOT PERMITTED — losses from any other head cannot reduce VDA income	S. 115BBH(1)(a) read with S.115BBH(2)
Infrastructure/business expenses	NOT DEDUCTIBLE against VDA transfer income	S. 115BBH(2)(a)

This is the most restrictive loss regime in any major jurisdiction. If you lose ₹5 lakh on BTC and gain ₹5 lakh on ETH in the same year, you pay 30% on ₹5 lakh (the ETH gain) with no offset for the BTC loss.

Example of the no-offset rule

BTC: Bought ₹10,00,000, Sold ₹5,00,000 → Loss: (₹5,00,000) — CANNOT USE
ETH: Bought ₹3,00,000, Sold ₹8,00,000 → Gain: ₹5,00,000

Tax = 30% × ₹5,00,000 = ₹1,50,000 + 4% cess = ₹1,56,000
The ₹5,00,000 BTC loss is permanently lost.

Section 9 — Anti-Avoidance Rules

9.1 No Wash Sale Rule (but irrelevant)

• wash sale irrelevance — India has no specific wash sale rule for crypto. However, this is irrelevant because: Losses cannot be offset against anything anyway (S.115BBH(2)(b)); There is no benefit to crystallising a loss since it cannot be used (S.115BBH(2)(b))

9.2 Anti-Avoidance Provisions

Anti-Avoidance Provisions table

Provision	Effect
General Anti-Avoidance Rule (GAAR) — Chapter X-A	Applies to impermissible avoidance arrangements; can recharacterise VDA transactions
Section 56(2)(x) — Gift taxation	VDA received without consideration or for inadequate consideration (>₹50,000) is taxable as income of the recipient
Benami Transactions	Holding VDA in another person's name is covered under the Benami Transactions (Prohibition) Act
Transfer pricing	Applicable to international VDA transactions between related parties

9.3 TDS as Anti-Avoidance

• TDS dual purpose — The 1% TDS under Section 194S serves a dual purpose: Revenue collection at source; Creating an audit trail — every VDA transfer is tracked via Form 26AS/AIS

Section 10 — Worked Examples

Example 1 — Simple BTC Sale

Input: Indian resident individual. Bought 1 BTC at ₹20,00,000 in January 2025. Sold 1 BTC at ₹50,00,000 in September 2025. Exchange fee: ₹5,000 (NOT deductible). Total other income: ₹8,00,000.

Computation:

Consideration:            ₹50,00,000
Cost of acquisition:      ₹20,00,000
Income from VDA transfer: ₹30,00,000

Tax on VDA: 30% × ₹30,00,000 = ₹9,00,000
Cess: 4% × ₹9,00,000       = ₹36,000
Total VDA tax:                ₹9,36,000

Surcharge: Total income = ₹8,00,000 + ₹30,00,000 = ₹38,00,000
  Below ₹50 lakh → Nil surcharge

TDS already deducted by exchange: 1% × ₹50,00,000 = ₹50,000
  (creditable against total tax liability)

Net VDA tax payable: ₹9,36,000 – ₹50,000 = ₹8,86,000
Exchange fee of ₹5,000 is NOT deductible.

Example 2 — Multiple VDAs, No Loss Offset

Input: Indian resident. FY 2025-26 transactions:

• Sold SOL: Cost ₹2,00,000, Proceeds ₹5,00,000, Gain ₹3,00,000
• Sold DOGE: Cost ₹4,00,000, Proceeds ₹1,00,000, Loss (₹3,00,000)
• Received 0.1 ETH staking reward: FMV ₹25,000

Computation:

SOL gain: ₹3,00,000 → Tax: 30% = ₹90,000
DOGE loss: (₹3,00,000) → CANNOT offset against SOL gain
Staking income: ₹25,000 → Taxed at applicable slab rate (not 30%)

VDA transfer tax: ₹90,000 + 4% cess = ₹93,600
Staking income tax: at slab rate on ₹25,000

Total: ₹93,600 + slab tax on ₹25,000
The DOGE loss of ₹3,00,000 is permanently lost.

Example 3 — Gift of VDA

Input: A receives 0.5 BTC as gift from a friend (non-relative). FMV at time of gift: ₹15,00,000. A later sells for ₹20,00,000.

Computation:

Gift taxation (S. 56(2)(x)):
  FMV of gift: ₹15,00,000 (exceeds ₹50,000)
  Taxable as income from other sources: ₹15,00,000
  Tax: at applicable slab rate

On subsequent transfer (S. 115BBH):
  Proceeds: ₹20,00,000
  Cost of acquisition: ₹0 (cost to previous owner for gifts from
    non-relatives — or FMV if S.49 applies)
  Gain: ₹20,00,000
  Tax: 30% × ₹20,00,000 = ₹6,00,000 + cess

Note: There is potential double taxation on the FMV amount.
Escalate gift of VDA cases to a Chartered Accountant.

Self-Checks

• Has the 30% flat rate (plus cess and surcharge) been applied to ALL VDA transfer income?
• Have losses been correctly excluded from any offset (no inter-VDA, no inter-head offset)?
• Is only the cost of acquisition deducted — no fees, commissions, or improvement costs?
• Has 1% TDS been accounted for (either by exchange or buyer in P2P)?
• Is Schedule VDA completed for every VDA transaction?
• Has staking/mining income been separately classified under "income from other sources"?
• Have advance tax obligations been considered (15 June, 15 Sep, 15 Dec, 15 Mar)?
• Is the correct ITR form used (ITR-2 or ITR-3)?
• Have gifts of VDA been checked against the ₹50,000 threshold under S.56(2)(x)?
• Has TDS credit been verified in Form 26AS / AIS?

PROHIBITIONS

• NEVER offset crypto losses against any income — it is explicitly prohibited under S.115BBH(2)(b)
• NEVER deduct exchange fees, gas fees, or any cost other than cost of acquisition
• NEVER apply capital gains exemptions (like S.54, S.54F) to VDA income
• NEVER treat VDA differently based on holding period — there is no LTCG/STCG distinction for VDA
• NEVER ignore the 1% TDS obligation on VDA transfers
• NEVER assume mining/staking income falls under the 30% regime — it is typically "income from other sources" at slab rates
• NEVER apply loss carry-forward for VDA — it does not exist
• NEVER ignore advance tax obligations for VDA income
• NEVER treat transfers between own wallets as taxable transfers
• NEVER present crypto tax positions as definitive — always label as estimated and flag for professional review

Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional (such as a CPA, EA, tax attorney, or equivalent licensed practitioner in your jurisdiction) before filing or acting upon.

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