Crypto Tax in India 2026: Everything a Beginner Needs to Know

If you’re holding or trading crypto in India, the tax rules are clear — and they haven’t changed since 2022. The government treats crypto as a virtual digital asset (VDA) and taxes it at a flat 30% on gains, with no deductions except the cost of acquisition. There’s also a 1% TDS on every transfer above a threshold. This guide walks you through what counts as crypto, how to calculate your tax, how to report it, and what risks to watch out for. No hype, no predictions — just the mechanics you need to stay compliant.

The Income Tax Act defines a Virtual Digital Asset (VDA) broadly. It covers cryptocurrencies like Bitcoin and Ethereum, NFTs, and any other digital tokens that can be transferred, stored, or traded electronically. Stablecoins like USDT also fall under this definition.

For example, if you buy 1 ETH for ₹1,00,000 and later sell it for ₹1,50,000, the ₹50,000 gain is taxable. The same applies if you swap ETH for USDT — that’s a taxable event too, because you’re disposing of one VDA for another. Even receiving crypto as payment for goods or services is treated as a transfer, triggering tax on the fair market value.

The tax rate is a flat 30% on any profit from transferring a VDA. This applies to all types of gains — short-term, long-term, it doesn’t matter. You cannot deduct expenses like internet costs, electricity, or trading fees from your gains. The only deduction allowed is the cost of acquisition — what you paid to buy the crypto.

Let’s say you bought 0.5 BTC for ₹10,00,000 and later sold it for ₹15,00,000. Your gain is ₹5,00,000. Tax at 30% is ₹1,50,000. Plus, a 4% health and education cess brings the total to ₹1,56,000. There’s no indexation benefit, and you cannot offset losses from one crypto against gains from another. If you lose money on a trade, that loss cannot be set off against any other income.

From July 2022, a 1% Tax Deducted at Source (TDS) applies on every transfer of VDA above ₹50,000 in a financial year (or ₹10,000 for certain cases like non-filers). The buyer deducts the TDS and deposits it with the government. You can claim credit for this TDS when filing your return.

For instance, if you sell crypto worth ₹1,00,000, the buyer will deduct ₹1,000 as TDS. You receive ₹99,000. At the end of the year, you report the full ₹1,00,000 as sale consideration, and the ₹1,000 TDS appears in your Form 26AS. If your total tax liability is ₹1,50,000, you subtract the ₹1,000 TDS and pay ₹1,49,000. This TDS applies even if you make no profit — it’s just a prepayment of tax.

You need to maintain a record of every transaction: date, type (buy, sell, swap, transfer), quantity, price in INR, and counterparty. For each disposal, calculate the gain as Sale Value minus Cost of Acquisition. If you swapped, the sale value is the fair market value of the asset you received.

Example: You bought 100 USDT at ₹80 each (₹8,000 total). You later swap those 100 USDT for 0.1 ETH when 1 USDT = ₹85. The sale value of USDT is ₹8,500. Gain = ₹8,500 – ₹8,000 = ₹500, taxed at 30%. You then hold ETH with a cost basis of ₹8,500.

When filing your income tax return (ITR), you must use the specific schedule for VDA (Schedule VDA under ITR-2 or ITR-3). You report each transaction or an aggregated summary, and the TDS claimed goes in the TDS schedule. If your total income from other sources is below the taxable limit, the 30% crypto tax still applies — no basic exemption benefit.

The biggest risk is non-disclosure. The Income Tax Department receives transaction data from Indian exchanges under the PMLA and can match it with your return. If you fail to report, you face penalties up to 100% of the tax under-reported, plus prosecution in serious cases.

Another risk: treating crypto as a business instead of capital gains. If you trade frequently, the tax department may classify you as a business, but the 30% rate still applies. However, business income allows for certain deductions (like trading fees) — but you also need to maintain books and get audited above a turnover threshold. Most casual investors are better off reporting under capital gains.

Also, watch out for airdrops, mining rewards, and staking income. These are treated as income at fair market value on the date of receipt, and later disposal attracts another 30% tax on any gain. Missing these can lead to notices.

Finally, cross-border transfers: if you transfer crypto to a foreign exchange or wallet, you must report it in the foreign asset schedule (Schedule FA) if the total value exceeds ₹2,50,000. Failure to do so can attract penalties under the Black Money Act.

First, use a crypto tax calculator or software that supports Indian rules. Manually tracking every trade is error-prone. Second, download your transaction history from every exchange you used. Third, keep a separate ledger for cost basis — FIFO (first in, first out) is the default method accepted by the tax department.

Fourth, file your return on time (usually July 31 for individuals). If you miss it, you can file a belated return by December 31, but you lose the ability to carry forward losses (though crypto losses are not allowed anyway). Fifth, ensure your TDS credits match Form 26AS. If an exchange deducted TDS but it’s not showing, contact them immediately.

Finally, consult a chartered accountant who understands crypto. The rules are strict, and a small mistake can trigger a notice. For example, if you received crypto as a gift, the giver pays tax on the transfer, but you — the receiver — may have to pay tax if the gift value exceeds ₹50,000, unless from a relative. These nuances are best handled by a professional.