Crypto Tax in India 2026: 30% Tax, 1% TDS & ITR Guide

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Assessment Year covered: AY 2026-27

Financial Year covered: FY 2025-26

Last updated: July 15, 2026

Author: EDITORIAL TEAM

Affiliate disclosure: This article is an independent educational guide. It does not recommend a particular cryptocurrency exchange, wallet, token or investment product for commission.

Tax disclaimer: This material is for general information only. It is not tax, legal, accounting or financial advice. Crypto transactions involving business income, mining, staking, decentralised finance, foreign exchanges, gifts, non-resident status or large transaction volumes should be reviewed by a practicing Chartered Accountant.

Quick Answer: How Is Crypto Taxed in India in 2026?

For income earned from cryptocurrency and other Virtual Digital Asset transactions during Financial Year 2025-26, the main Indian crypto tax rules are:

Income from transferring a Virtual Digital Asset is generally taxed at a special rate of 30% under Section 115BBH.
Applicable surcharge and 4% Health and Education Cess are added to the income tax.
Only the legally recognised cost of acquisition may generally be deducted when calculating income from a VDA transfer.
A VDA loss cannot ordinarily be set off against salary, business income, property income, stock-market gains or other income.
VDA losses cannot be carried forward to a later assessment year.
Section 194S may require 1% TDS on the transaction consideration, rather than on the profit.
Crypto-to-crypto exchanges can constitute taxable transfers even when no rupees enter the user’s bank account.
Taxpayers must reconcile transaction records, TDS entries, AIS, Form 26AS and the applicable Schedule VDA disclosures before filing.

The government’s original explanatory memorandum states that Section 115BBH taxes income from a VDA transfer at 30%, disallows deductions other than cost of acquisition and restricts loss set-off and carry-forward. It also introduced Section 194S for 1% TDS on consideration paid for transferring a VDA to a resident.

AY 2026-27 and Tax Year 2026-27 Are Not the Same Thing

A major source of confusion in 2026 is the transition between India’s old and new income-tax legislation.

This guide deals primarily with Assessment Year 2026-27, which covers income earned from April 1, 2025 to March 31, 2026. The official Finance Bill 2026 states that income tax for the assessment year beginning April 1, 2026 is charged under the Income-tax Act, 1961. The new Income-tax Act, 2025 applies separately to the tax year beginning April 1, 2026.

In practical terms:

Period	Common description	Governing framework
April 1, 2025 to March 31, 2026	FY 2025-26 / AY 2026-27	Income-tax Act, 1961
April 1, 2026 to March 31, 2027	Tax Year 2026-27	Income-tax Act, 2025, subject to applicable rules and amendments

Do not use a return guide written for Tax Year 2026-27 as though it automatically applies to an AY 2026-27 return. Section numbers, terminology, forms and reporting procedures may differ during the transition.

What Is a Virtual Digital Asset?

The Indian tax definition of a Virtual Digital Asset is broader than the everyday word “cryptocurrency.”

A VDA can include digital information, code, numbers or tokens generated through cryptographic or other means that represent value and can be transferred, stored or traded electronically. The statutory framework also allows notified non-fungible tokens and other notified digital assets to fall within the definition. The Central Government can notify assets that are included or excluded.

Common examples may include:

Bitcoin
Ether
Stablecoins such as USDT or USDC
Exchange or utility tokens
Governance tokens
Certain non-fungible tokens
Other notified blockchain-based assets

Not every digital balance is automatically a VDA. Government notifications have excluded certain categories, and the treatment of specialised tokens may depend on their legal and economic characteristics.

Loyalty points, closed-system vouchers, game credits and subscription benefits should not automatically be treated as cryptocurrency merely because they are digitally recorded. When an asset is unusual, verify its notified status rather than relying on the label used by its issuer.

The 30% Special Tax Rate Under Section 115BBH

Section 115BBH applies a special 30% tax rate to income arising from the transfer of a Virtual Digital Asset.

The basic calculation is:

Income from VDA transfer = Transfer consideration − Permitted cost of acquisition

Base VDA tax = Income from VDA transfer × 30%

The tax calculated at 30% may then be increased by applicable surcharge and Health and Education Cess. For AY 2026-27, the official Finance Bill retains a 4% Health and Education Cess on income tax and applicable surcharge.

Simple example

Suppose a taxpayer:

Buys Bitcoin for ₹2,50,000
Sells it for ₹3,50,000
Has a taxable transfer gain of ₹1,00,000

The simplified calculation would be:

Transfer income: ₹1,00,000
Base tax at 30%: ₹30,000
Cess at 4% on ₹30,000: ₹1,200
Simplified total: ₹31,200

This calculation assumes that no surcharge applies and ignores the taxpayer’s other income, rebates, interest, advance-tax position and TDS credits.

Is the effective rate always exactly 31.2%?

No.

The commonly quoted 31.2% figure is 30% tax plus 4% cess where no surcharge applies. A taxpayer with income above the applicable surcharge threshold may face a higher effective rate.

The final return calculation can also be affected by:

Other taxable income
Applicable tax regime
Surcharge and marginal relief
Residential status
Tax rebates, where legally available
TDS credits
Advance tax already paid
Interest for shortfall or delay

For that reason, “30% tax” should not be presented as the taxpayer’s complete final bill.

Does Simply Buying or Holding Crypto Create Tax?

Buying a VDA with rupees ordinarily establishes an acquisition cost. Merely continuing to hold the asset does not, by itself, involve a sale or exchange.

As a practical inference from the transfer-based wording of Section 115BBH, unrealised price appreciation is generally not taxed as VDA transfer income until a relevant transfer occurs.

For example:

Buying Bitcoin with INR: ordinarily no transfer income for the buyer
Holding Bitcoin as its market price rises: ordinarily no transfer income merely because of the price increase
Selling Bitcoin for INR: generally a transfer
Exchanging Bitcoin for Ether: generally a transfer of the Bitcoin
Using Bitcoin to buy a product: potentially a transfer
Giving Bitcoin to another person: may involve gift and transfer provisions

Receiving tokens through employment, professional work, rewards, an airdrop, staking or mining can raise a separate income issue even before a later sale. Those cases should not be confused with a straightforward market purchase.

Taxable Crypto Events: Practical Matrix

The following matrix summarises common transactions. It is an operational guide rather than a substitute for individual advice.

Transaction	Likely immediate tax position	Later tax issue
Buying crypto with INR	Usually no VDA transfer income for the buyer	Acquisition cost must be recorded
Holding crypto	Generally no transfer tax merely for holding	Tax may arise when transferred
Selling crypto for INR	Taxable transfer	Gain calculated under Section 115BBH
Swapping one token for another	Generally a taxable transfer of the token given up	New cost records required for token received
Spending crypto on goods or services	May constitute a taxable transfer	Consideration must be valued in INR
Transferring between wallets owned by the same person	Generally not a disposal where beneficial ownership does not change	Ownership trail must be documented
Receiving crypto as a non-relative gift	May be taxable under Section 56(2)(x), subject to thresholds and exceptions	Later transfer may be taxed under Section 115BBH
Receiving crypto from a specified relative	May qualify for a gift exemption	Cost history for future sale remains important
Receiving an airdrop	Treatment can depend on facts, rights and ascertainable value	Later sale can create VDA transfer income
Receiving staking rewards	Receipt classification can depend on the arrangement	Later sale can create another taxable event
Mining tokens	Fact-specific and potentially complex	Sale may fall under VDA transfer provisions
Lending or depositing tokens into DeFi	Depends on whether ownership or economic rights are transferred	Rewards, interest and withdrawals require review
Selling an NFT	May be a VDA transfer if the NFT falls within the notified definition	Cost and creator income issues may arise

The statutory scheme expressly recognises that consideration for one VDA may be another VDA. This is why a crypto-to-crypto exchange should not be ignored merely because the user did not cash out to INR.

Crypto-to-Crypto Swaps Are Commonly Missed

A trader may believe no tax is due until money reaches a bank account. That assumption can lead to incomplete reporting.

When one VDA is exchanged for another, the first asset has generally been transferred in return for the second. An INR value must therefore be established for the consideration received.

Worked swap example

Assume:

A taxpayer purchased 1 ETH for ₹1,80,000
The taxpayer later exchanged that ETH for SOL
The SOL received had a fair market value of ₹2,20,000 at the time of exchange

Simplified calculation:

Value received: ₹2,20,000
ETH acquisition cost: ₹1,80,000
Income from transfer: ₹40,000
Base tax at 30%: ₹12,000
Cess at 4%, assuming no surcharge: ₹480
Simplified total before TDS credit: ₹12,480

The taxpayer must also establish records for the SOL received. A practical starting point is the INR value used for the swap, although the correct cost treatment should be checked against the transaction facts and filing position.

The record should include:

Date and time
Quantity of ETH transferred
Quantity of SOL received
Exchange or wallet used
INR fair market value
Price source
Trading pair
Fees
Transaction ID

The 1% TDS Rule Under Section 194S

Section 194S requires 1% TDS on qualifying consideration paid to a resident for the transfer of a Virtual Digital Asset.

The crucial point is that TDS is generally calculated on the consideration or transaction value, not on the seller’s profit.

Example

A taxpayer:

Bought a token for ₹95,000
Sold it for ₹1,00,000
Made a gain of ₹5,000

The simplified TDS may be:

1% of ₹1,00,000 = ₹1,000

It is not:

1% of the ₹5,000 profit

The final tax liability is calculated separately. The ₹1,000 TDS is generally a tax credit, subject to it being correctly deposited and reflected against the taxpayer’s PAN.

TDS thresholds

The original Section 194S framework provides different annual thresholds.

Payer category	Annual consideration threshold
Specified person	₹50,000
Other payer	₹10,000

A specified person broadly includes:

An individual or HUF without income from business or profession; or
An individual or HUF whose preceding-year business turnover or professional receipts remain within the statutory limits

The original memorandum describes the business threshold as ₹1 crore and the professional receipts threshold as ₹50 lakh for this definition. It also states that no TDS is required where aggregate consideration remains below the applicable threshold.

TDS is not an additional final 1% tax

TDS is an advance collection and reporting mechanism. It should normally be matched against:

Form 26AS
Annual Information Statement
Exchange reports
Relevant TDS certificates
The taxpayer’s transaction ledger

A taxpayer should not simply add 1% TDS to the 30% tax as though the two were separate final taxes. The TDS credit is generally adjusted against the final tax liability.

Transactions settled partly or wholly in kind

Where consideration is wholly in kind, or the cash portion is insufficient to cover TDS, the law requires tax payment to be ensured before the consideration is released. This can apply to token swaps and other non-cash arrangements.

P2P transactions

In a peer-to-peer transaction, the parties should not assume that an exchange will automatically handle every tax obligation. The identity of the buyer, seller, resident payee, platform and settlement route may affect who must deduct and deposit TDS.

Cost of Acquisition: What Can Be Deducted?

Section 115BBH is restrictive. The official explanatory memorandum states that no expenditure or allowance is deductible other than the cost of acquisition.

The general formula is:

Taxable VDA transfer income = Consideration − Cost of acquisition

The purchase price paid for the asset is the clearest part of the acquisition cost.

However, some articles go too far by declaring that every exchange charge, network fee or incidental cost can never form part of acquisition cost. The statute disallows expenditure other than cost of acquisition, but whether a particular amount is part of the acquisition cost or is a separate transfer expense can depend on its nature and the taxpayer’s facts.

A safer approach is:

Record the gross asset purchase price
Record every exchange fee separately
Record network and gas fees separately
Record deposit and withdrawal charges
Do not automatically deduct them
Ask a CA whether any acquisition-linked amount forms part of legally recognised acquisition cost

Expenses that should not be casually deducted

The following should not be claimed without a clear legal basis:

Internet bills
Electricity bills
Hardware costs
Loan interest
Trading subscriptions
Research services
Portfolio software fees
Transfer expenses
Professional fees
General business overheads

A taxpayer carrying on a genuine business may have additional accounting questions, but Section 115BBH still imposes specific restrictions on computing income from VDA transfers.

No Loss Set-Off and No Carry-Forward

The treatment of losses is one of the most severe parts of India’s VDA tax framework.

The official explanatory memorandum states:

No set-off of a VDA transfer loss is allowed against income computed under another provision.
The loss cannot be carried forward to later assessment years.
While calculating income from a VDA transfer, no general loss set-off or deduction is permitted.

The conservative filing position generally followed is that a loss on one VDA transfer should not be used to reduce a taxable gain from another VDA. Taxpayers with large volumes or unusual transaction structures should obtain specific professional advice rather than netting the entire portfolio automatically.

Worked example

During FY 2025-26:

Bitcoin transaction

Purchase cost: ₹2,00,000
Sale value: ₹3,00,000
Gain: ₹1,00,000

Token B transaction

Purchase cost: ₹1,50,000
Sale value: ₹80,000
Loss: ₹70,000

A taxpayer may be tempted to calculate:

₹1,00,000 gain − ₹70,000 loss = ₹30,000 taxable income

That is not the conservative Section 115BBH treatment.

The Bitcoin gain may remain taxable at ₹1,00,000, while the ₹70,000 VDA loss provides no reduction and cannot be carried forward.

Simplified tax on the gain:

Base tax: ₹30,000
Cess at 4%: ₹1,200
Total before surcharge and credits: ₹31,200

The taxpayer’s economic portfolio profit is only ₹30,000, but the simplified tax before credits can exceed that amount. This illustrates why trade-by-trade record keeping matters.

Tax on Crypto Gifts

Virtual Digital Assets were added to the property framework used by Section 56(2)(x). This means receiving crypto without consideration or for inadequate consideration can create tax consequences.

Gift received from a non-relative

Where a person receives specified property without consideration and the aggregate fair market value exceeds the statutory ₹50,000 threshold, the whole qualifying amount may become taxable, rather than only the amount above ₹50,000.

Example

A friend who is not a specified relative transfers crypto worth ₹75,000.

Subject to the precise facts and available exceptions:

The receipt may be taxable under “Income from Other Sources”
The amount may be taxed at the recipient’s applicable rate
A later sale may create a separate Section 115BBH transfer calculation

Gifts from specified relatives

Gifts received from relatives defined by the Income-tax Act may qualify for an exemption. The definition is technical and includes specific family relationships; it does not include every person commonly called a cousin, partner or family friend.

Other statutory exceptions can include qualifying receipts:

On the occasion of marriage
Under a will
By inheritance
In contemplation of the payer’s death
From specified institutions or funds

Future cost basis

When the recipient later sells gifted crypto, the correct cost basis may depend on whether the initial receipt was taxed, exempt because of the relationship, inherited or received through another statutory exception.

Do not assume that the market value on the gift date is always the future cost. Preserve:

Donor’s purchase records
Date of gift
Relationship evidence
Wallet addresses
Transaction hash
Fair market value
Gift deed or written declaration
Previous owner’s acquisition history

Airdrops: Tax Treatment Is More Nuanced Than It Looks

Many online guides state that every airdrop is automatically taxed at market value on receipt. That is too broad.

Indian tax law does not provide one simple provision labelled “airdrop tax.” The treatment may depend on:

Whether the token is a VDA
Whether the recipient has accepted or claimed it
Whether beneficial ownership has passed
Whether the token has an ascertainable fair market value
Whether the receipt falls within Section 56(2)(x)
Whether the receipt is connected to employment, business or professional activity
Whether the token is freely transferable
Whether the recipient provided consideration or services

A conservative practical approach is to record the fair market value when the recipient obtains control over a token with a measurable value. However, the legal classification and taxable point should be confirmed for material amounts.

Later sale

If an airdropped token is later sold, exchanged or spent, that transaction can create VDA transfer income under Section 115BBH.

The future cost basis should not be guessed. It may depend on how the initial receipt was taxed and which cost provision applies.

Airdrop records

Keep:

Claim date
Receipt date
Wallet address
Transaction hash
Token quantity
Conditions attached to the airdrop
Screenshots showing market value
Exchange price data
Evidence of whether services were supplied
Date the tokens became transferable

Tokens sent to a wallet without the owner’s knowledge, consent or practical ability to sell may raise different questions from a valuable token deliberately claimed through a protocol.

Staking Rewards, Yield and DeFi Income

Staking arrangements differ significantly.

A taxpayer may:

Delegate tokens while retaining ownership
Lock tokens in a smart contract
Transfer tokens to a centralised exchange
Receive newly issued protocol tokens
Receive a share of network fees
Receive a different reward token
Receive liquid-staking tokens
Participate through a pooled service

Because the legal rights differ, the tax analysis may also differ.

Potential issues include:

Whether depositing the original token is itself a transfer
Whether rewards are taxable when accrued, credited, claimed or sold
How reward tokens should be valued
Which head of income applies at receipt
What cost basis applies to a later sale
Whether a DeFi receipt token represents ownership or a new asset
Whether TDS applies at any stage

For small retail rewards, taxpayers commonly use an income-on-receipt approach when the tokens have an ascertainable value and are under the recipient’s control. That is a practical filing position, not a universal statutory rule for every protocol.

Maintain a ledger for each reward event, rather than recording only the final withdrawal to an exchange.

Mining and Validator Income

Mining is another area where broad statements should be avoided.

The tax treatment can depend on whether the taxpayer:

Mines occasionally
Operates a commercial mining business
Runs a validator
Receives block rewards
Receives transaction fees
Uses owned or rented hardware
Mines through a pool
Receives tokens with no reliable market
Is compensated for services

Potential questions include:

Whether tokens are taxed when generated or when received
Whether mining activity is a business
How the asset’s acquisition cost is determined
Whether operating costs are deductible under another head
How Section 115BBH applies at the later transfer stage
Whether indirect tax or cross-border issues arise

The rule allowing only cost of acquisition in the VDA transfer computation does not, by itself, answer every question about income earned from running a mining or validation activity.

High-volume miners and validators should obtain transaction-specific advice.

Wallet-to-Wallet Transfers

Moving assets between two wallets beneficially owned by the same taxpayer will generally not resemble a sale or exchange because the owner has not changed.

Examples include:

Exchange wallet to hardware wallet
One personal hardware wallet to another
Personal wallet to a new recovery wallet
Exchange account to another exchange account in the same taxpayer’s name

However, a wallet transfer may appear in blockchain data as an outgoing transaction. Without records, it may later be mistaken for a disposal.

Keep:

Originating wallet address
Destination wallet address
Proof both wallets belong to the taxpayer
Transaction hash
Date and time
Token quantity
Network fee
Exchange withdrawal confirmation
Deposit confirmation

A transfer to a spouse, friend, company, trust, partnership or jointly controlled wallet should not automatically be treated as a self-transfer.

Using Crypto to Buy Goods or Services

Paying for a product or service with crypto may be a taxable transfer.

Example:

A taxpayer acquired a token for ₹60,000
The taxpayer later uses it to purchase a laptop worth ₹90,000

The token has effectively been exchanged for property worth ₹90,000.

Simplified transfer income:

₹90,000 − ₹60,000 = ₹30,000

The ₹30,000 may fall within Section 115BBH, subject to the exact valuation and transaction facts.

The merchant may also have separate accounting, GST, income-recognition and TDS considerations.

Keep:

Merchant invoice
INR value of the product
Token price at payment time
Transaction hash
Original acquisition cost
Any refund or cancellation record

NFTs and Creator Income

NFT taxation can involve more than one layer.

Investor selling an NFT

If the NFT falls within the notified VDA definition, the sale or exchange may fall within Section 115BBH.

Artist or creator issuing an NFT

A creator may receive:

Initial mint proceeds
Marketplace royalties
Resale royalties
Tokens
Foreign currency
Platform incentives

The initial receipt may arise from business, profession, copyright exploitation or another source. A later transfer of a VDA retained by the creator may raise a separate Section 115BBH issue.

NFT buyers

Buyers should preserve:

Mint price
Marketplace fee
Gas fee
Wallet transaction
Token contract address
INR conversion rate
Evidence that the NFT is genuine
Purchase and sale dates

NFT scams, duplicate collections and wash trades create both financial and record-keeping risks.

Which ITR Form Should a Crypto Investor Use?

The correct ITR form depends on the taxpayer’s complete income profile, not merely on the fact that crypto was sold.

For AY 2026-27, the government notified ITR forms in March 2026. ITR-2 generally applies to individuals and HUFs who do not have income from business or profession, while taxpayers with business or professional income generally need another applicable form, commonly ITR-3 for individuals or HUFs.

ITR-2 may be relevant where:

The taxpayer is an individual or HUF
Crypto activity is not treated as business income
The taxpayer has no business or professional income
The other ITR-2 eligibility conditions are satisfied

ITR-3 may be relevant where:

Crypto trading forms part of a business
The taxpayer has another business or profession
The transaction pattern, organisation and conduct support business classification
Books, audit or business schedules are applicable

Do not choose ITR-3 solely because there are many transactions. Likewise, do not assume ITR-2 is correct merely because the taxpayer calls themselves an investor.

Relevant factors can include:

Frequency
Turnover
Holding period
Intention
Use of leverage
Organised trading systems
Accounting treatment
Source of funds
Whether trading is the taxpayer’s main activity

A CA should review borderline cases.

How Schedule VDA Works

Schedule VDA is the dedicated return schedule used to report income arising from VDA transfers.

The fields and validation requirements should be checked against the actual AY 2026-27 filing utility. A taxpayer may need transaction-level or category-level information such as:

Date of acquisition
Date of transfer
Head of income
Cost of acquisition
Consideration received
Income from the transfer
Loss, where the utility requires disclosure
TDS details

Do not report only the net amount deposited into a bank account.

A bank withdrawal total may exclude:

Open trades
Crypto-to-crypto swaps
TDS
Fees
Transfers to self-custody
Gifts
Staking rewards
DeFi activity
Offshore exchange transactions

Schedule VDA should be supported by a reconciliation that connects the return to the taxpayer’s complete transaction history.

Step-by-Step Crypto ITR Preparation Checklist

Step 1: List every platform

Include:

Indian exchanges
Foreign exchanges
P2P platforms
Software wallets
Hardware wallets
DeFi protocols
NFT marketplaces
Mining pools
Staking services

Step 2: Export complete transaction histories

Download:

Trade history
Order history
Deposits
Withdrawals
TDS reports
Profit-and-loss reports
Reward history
Futures or derivative reports
Wallet CSV files

Do not rely on an app remaining accessible indefinitely.

Step 3: Build an asset movement map

Track each asset from:

Purchase
Deposit
Swap
Withdrawal
Self-transfer
Staking
Sale
Gift
Spending

The purpose is to avoid treating a transfer between the taxpayer’s accounts as an unexplained disposal.

Step 4: Convert values to INR

Every relevant transaction should have a defensible INR value at the transaction time.

Record:

Source of price
Exact time
Trading pair
Exchange
Conversion method
Foreign currency rate, where relevant

Use a consistent process.

Step 5: Determine acquisition cost

Match each transferred unit to a documented acquisition record using the cost method accepted for the return position.

Do not switch casually between FIFO, weighted average and transaction-specific identification.

Step 6: Identify taxable transfers

Mark:

INR sales
Token swaps
Payments
Gifts
NFT sales
DeFi disposals
Liquidations
Settlement events

Step 7: Separate receipt income

Review:

Salary paid in tokens
Freelance payments
Airdrops
Staking rewards
Referral rewards
Mining income
Creator royalties
DeFi yield

Step 8: Reconcile TDS

Compare exchange reports against:

Form 26AS
AIS
PAN
Transaction values
Counterparty records

Step 9: Complete Schedule VDA

Enter the required details using the AY 2026-27 utility and validation rules.

Step 10: Review the complete return

Check:

Correct ITR form
Correct head of income
TDS credit
Bank accounts
Foreign assets
Business schedules
Advance tax
Interest
Loss treatment
Disclosures

Essential Record-Keeping Checklist

Retain the following:

Complete exchange CSV files
Buy and sell orders
Swap histories
Wallet addresses
Transaction hashes
Bank statements
UPI records
TDS certificates
Form 26AS
AIS
Screenshots of token values
Gift documents
Relationship evidence for exempt gifts
Airdrop claim records
Staking reward records
Mining pool statements
Hardware-wallet logs
NFT marketplace records
DeFi smart-contract history
INR valuation workings
Previous-year crypto tax computations
CA correspondence
Copies of filed returns

Keep original files rather than only screenshots. CSV exports are easier to reconcile and audit.

Foreign Exchanges and Self-Custody

Using a foreign exchange does not remove an Indian resident’s tax obligations.

Potential issues include:

Indian tax on global income
Missing Section 194S deduction
Foreign asset or account disclosures
Exchange-control considerations
Inability to obtain standard TDS reports
Incomplete INR values
Platform closure risk
Counterparty identification
Cross-border remittance records

Self-custody also does not make a transaction invisible for tax purposes. Public blockchain data may preserve the transaction even where the wallet does not display an INR tax report.

Taxpayers should maintain an address book linking wallets and exchanges to their own records.

Common Crypto Tax Mistakes

1. Reporting only INR withdrawals

This misses swaps, spending, gifts and offshore trades.

2. Treating TDS as the final tax

The 1% deduction is normally a credit, not a replacement for the final income-tax calculation.

3. Netting all profits and losses

The VDA loss restrictions can prevent portfolio-level netting.

4. Ignoring stablecoin trades

USDT, USDC and similar tokens may still be VDAs. A stable price does not make the transfer irrelevant.

5. Deducting every fee

Only legally recognised cost of acquisition is expressly protected within the Section 115BBH computation.

6. Forgetting crypto-to-crypto swaps

A swap can be a taxable transfer without a bank withdrawal.

7. Treating every wallet movement as a sale

Self-transfers should be documented separately.

8. Assuming every gift is exempt

The statutory relative definition is specific.

9. Using the wrong fair market value

A price from hours or days later may distort the gain.

10. Filing with incomplete AIS or TDS reconciliation

Missing or delayed reporting can produce mismatches.

11. Assuming airdrops and staking have one universal rule

The treatment depends on the arrangement, rights and valuation.

12. Choosing the ITR form based only on convenience

The form must match the taxpayer’s complete income profile.

Crypto Tax Examples

Example 1: Sale for INR

Purchase cost: ₹2,50,000
Sale consideration: ₹3,50,000
Transfer income: ₹1,00,000
Base tax: ₹30,000
Cess: ₹1,200
Simplified total: ₹31,200
Illustrative TDS: ₹3,500
Simplified balance after TDS credit: ₹27,700

This ignores surcharge and other return items.

Example 2: Sale at a loss

Purchase cost: ₹1,00,000
Sale value: ₹60,000
Loss: ₹40,000

The loss generally cannot offset salary, stock gains or another head of income and cannot be carried forward.

Example 3: Token swap

Token A cost: ₹70,000
Value of Token B received: ₹90,000
Transfer income: ₹20,000
Base tax: ₹6,000
Cess: ₹240
Simplified total: ₹6,240

Example 4: Non-relative gift

Crypto received from friend: ₹80,000
Aggregate qualifying gift value exceeds ₹50,000

The receipt may be taxable under Section 56(2)(x), subject to facts and exceptions. A later disposal creates a separate VDA transfer calculation.

Example 5: Transfer to own wallet

Exchange withdrawal to taxpayer’s hardware wallet
Same beneficial owner before and after

Generally no sale or exchange, but the taxpayer must prove ownership and connect both sides of the movement.

Example 6: Paying a freelancer in crypto

A business pays a resident freelancer tokens worth ₹1,00,000.

Potential issues can include:

Expense treatment for the payer
Income recognition for the freelancer
TDS under the applicable provision
Section 194S
GST
INR valuation
Later VDA transfer income for the recipient

This transaction needs professional review.

Frequently Asked Questions

What is the crypto tax rate in India for AY 2026-27?

Income arising from the transfer of a Virtual Digital Asset is generally taxed at 30% under Section 115BBH, plus applicable surcharge and 4% Health and Education Cess.

Is 1% TDS charged on profit?

No. Section 194S generally applies to qualifying transfer consideration, not merely the profit.

Can crypto losses be offset against crypto gains?

The conservative treatment is that a VDA transfer loss cannot be used to reduce another taxable VDA gain. It cannot be set off against other income or carried forward.

Is buying crypto taxable?

A normal purchase with INR generally establishes acquisition cost. The later transfer is the primary Section 115BBH event.

Is holding crypto taxable?

Unrealised appreciation from merely holding a purchased VDA is generally not transfer income. Receiving tokens through rewards, services or gifts can create separate issues.

Is swapping Bitcoin for Ether taxable?

Generally yes. Exchanging one VDA for another can constitute a transfer of the asset given up.

Is sending crypto to my own wallet taxable?

Generally not where beneficial ownership remains unchanged, but complete ownership evidence should be retained.

Are exchange fees deductible?

Section 115BBH permits cost of acquisition and disallows other expenditure. Whether a particular acquisition-linked charge forms part of the cost can be fact-specific. Do not deduct it automatically.

Is an airdrop taxed immediately?

It depends on the facts, including control, value, consideration and the reason for receipt. A later transfer may independently be taxed.

Are staking rewards taxable?

They may be taxable, but the timing and classification can depend on the protocol and the taxpayer’s rights. Keep reward-level records.

Is crypto received from a relative tax-free?

It may qualify for an exemption if the donor falls within the statutory definition of relative. A later transfer can still be taxable.

Which ITR form should a crypto investor use?

An individual or HUF without business income may use ITR-2 where eligible. A taxpayer with business or professional income may need ITR-3 or another applicable form.

Do foreign exchange transactions need to be reported?

Indian residents may have Indian tax and disclosure obligations even when transactions occur on an offshore platform.

Can excess TDS be refunded?

A refund may arise where valid TDS credits exceed the taxpayer’s final liability, subject to return processing and verification.

Does paying 30% tax make crypto legal tender?

No. Taxation does not make a private token legal tender and does not amount to government approval of an exchange, coin or investment.

Is this guide enough to file my return?

No. It explains the general framework but cannot determine residency, business classification, cost basis, gift exemptions, foreign-asset reporting or protocol-specific treatment.

Final Filing Checklist

Before submitting an AY 2026-27 return, confirm that:

Every exchange and wallet has been reviewed
INR sales have been captured
Crypto-to-crypto swaps have been captured
Wallet self-transfers have been separated
Acquisition costs are supported
Unsupported expenses have not been deducted
VDA losses have not been improperly offset
TDS has been reconciled
AIS and Form 26AS have been reviewed
Gift transactions have supporting evidence
Airdrops and staking rewards have been analysed
Foreign platforms have been considered
The correct ITR form has been selected
Schedule VDA matches the transaction ledger
The final return has been reviewed for other income and disclosures

Update and Correction Policy

This guide should be reviewed when any of the following occurs:

A Finance Act changes VDA taxation
CBDT issues a circular or clarification
The Income Tax Department changes its filing utilities
Schedule VDA fields are amended
A court issues a material VDA tax decision
Section 194S procedures change
The new Income-tax Act rules change the treatment for later tax years

Correction log

Date	Update
July 15, 2026	Consolidated AY 2026-27 guide; clarified the transition between the Income-tax Act, 1961 and Income-tax Act, 2025; qualified airdrop, staking, mining, fee and cost-basis claims; updated ITR-form guidance.

Final Disclaimer

This article provides general educational information about crypto tax in India for AY 2026-27. It does not consider every taxpayer’s residence, income level, tax regime, occupation, business status, exchange activity, wallet history, foreign assets, gifts, DeFi arrangements or legal obligations.

Cryptocurrency tax reporting can involve several taxable points even when the taxpayer has not withdrawn money to a bank account. Tax laws, filing utilities, circulars and interpretations can change.

Consult a practicing Chartered Accountant before filing where the transaction history includes significant trading, foreign exchanges, gifts, airdrops, mining, staking, NFTs, derivatives, decentralised finance, business activity or unexplained AIS and TDS differences.

Content review: This page was last reviewed on July 15, 2026. Cryptocurrency rules, fees, payment methods and platform conditions can change. Report outdated information through our Contact Us page.