How Crypto Is Taxed in India: Laws, Rates, Rules & Compliance

Cryptocurrency has exploded in popularity across India, but honestly, a lot of folks are still scratching their heads about taxes. Back in 2022, the Indian government rolled out clear tax rules for digital assets, finally giving us some structure around these investments.

Income from cryptocurrency transactions in India gets taxed at a flat 30% rate plus cess, no matter how long you hold the asset. On top of that, most crypto transactions above certain limits have a 1% Tax Deducted at Source (TDS). These rules hit all sorts of virtual digital assets—Bitcoin, Ethereum, NFTs, you name it.

If you’re buying, selling, trading, or earning crypto in India, you really need to know these tax implications. The rules don’t just affect simple trades; they also cover mining, staking, airdrops, and more. Here’s a practical breakdown of the current tax structure, how different types of crypto income get taxed, and what you need to know for compliance and reporting.

Current Crypto Tax Structure in India

A professional person analyzing cryptocurrency data and tax documents with a digital map of India and crypto symbols in the background.

The Finance Act 2022 set up a pretty thorough tax framework for cryptocurrency in India, with sections that specifically target Virtual Digital Assets (VDAs). There’s a flat tax rate on profits, mandatory TDS, and service taxes on platforms.

Flat 30% Tax on Profits

Section 115BBH of the Income Tax Act slaps a flat 30% tax rate on all crypto profits, no matter how long you hang onto your coins.

It’s a simple calculation. When you sell crypto, you can only knock off your original purchase price from the sale proceeds. No other expenses are allowed as deductions.

That means you can’t deduct mining costs, transaction fees, or platform charges. Say you bought Bitcoin for ₹100,000 and sold it for ₹150,000—you’re paying ₹15,000 in taxes (30% of your ₹50,000 gain).

Losses can’t be offset against other types of income, and you can’t carry them forward to future years either. The rules are definitely stricter than what you see with stocks or real estate.

This 30% tax hits all crypto activities—trading, selling, even spending digital assets on stuff.

1% TDS on Crypto Transactions

Section 194S makes buyers deduct 1% TDS on crypto transactions over certain thresholds: ₹50,000 for specified persons or ₹10,000 for everyone else.

Usually, the buyer deducts this tax before paying in peer-to-peer deals. Most Indian crypto exchanges handle TDS for you automatically.

Specified persons are individuals or Hindu Undivided Families with business turnover under ₹1 crore or professional income under ₹50 lakh, or those without business/professional income.

You need to deposit TDS with the government on time. Sellers get Form 26AS showing the deducted amount, which they can use as credit when figuring out their final tax bill.

If you skip TDS deduction or deposit, you’re looking at penalties and interest charges.

GST on Crypto Services and Exchanges

Crypto exchange services and related activities get hit with Goods and Services Tax. Exchanges tack on 18% GST to their trading fees and commissions.

This GST applies to the service part, not the crypto itself. So when you pay trading fees, you’re also paying GST on those.

Mining services and crypto consulting attract GST too. Basically, if you’re providing a service related to crypto, GST is in play.

Exchanges must register for GST if their turnover goes over the threshold. They’ve got to file GST returns and send the taxes to the government.

Virtual Digital Assets (VDAs) and Indian Tax Law

India’s VDA tax system uses specific legal definitions and reporting rules set up in 2022. The rules cover everything from cryptocurrencies to NFTs under Section 115BBH, and you have to report them in Schedule VDA.

Definition of Virtual Digital Assets

The Income Tax Act defines Virtual Digital Assets in Section 2(47A) pretty broadly. It includes cryptos like Bitcoin and Ethereum, NFTs, and other digital tokens.

The definition leaves out a few things:

Fiat currency (regular government-issued money)

Gift cards and vouchers

Traditional financial instruments

This makes it clear what counts as taxable digital assets and what doesn’t. The government came up with this to cover new digital property types that old tax laws never imagined.

Indian law treats all VDAs as property, not currency. So, most of the time, they fall under capital gains rules—not regular income.

The broad definition means new digital assets will probably get pulled under VDA rules too, so you can’t dodge taxes by switching up asset types.

Schedule VDA and ITR Reporting

If you bought, sold, or received VDAs during the tax year, you have to report every VDA transaction using Schedule VDA in your Income Tax Return.

The schedule asks for details on each transaction:

Purchase date and price

Sale date and price

Type of VDA

Exchange or platform used

Applicable Sections & Legal Framework

Section 115BBH sets the rules for VDA taxation—a flat 30% tax rate plus 4% cess on all VDA gains.

Key features of Section 115BBH:

No indexation benefits (unlike real estate)

Only acquisition cost is deductible

No business expenses allowed

Losses can’t be set off against other income

Section 194S deals with TDS for VDA transactions. Exchanges and buyers must deduct 1% TDS if the annual transaction total goes over:

₹50,000 for specified persons (small businesses/individuals)

₹10,000 for everyone else

The Finance Act 2022 brought in these rules—India’s first formal tax framework for digital assets.

These sections work together to make sure all VDA income gets taxed. The high rates and limited deductions show the government’s cautious stance on crypto.

Taxation of Different Crypto Income Types

India taxes crypto in a few different ways depending on how you earn it. All crypto gains get hit with a flat 30% tax rate, and TDS applies at 1% on most transactions.

Gains from Trading, Buying, and Selling

Trading or selling crypto? That’s taxable at a flat 30% rate plus cess, whether you held it for a day or a year. There’s no benefit for long-term holding.

Tax Calculation:

Sale Price - Purchase Price = Taxable Gain

Tax Rate: 30% (plus 4% cess)

Only acquisition cost is deductible

TDS Requirements: Buyers must deduct 1% TDS if the transaction goes over:

₹50,000 for specified persons (individuals not in business)

₹10,000 for other buyers

TDS applies to the total sale value, not just profits. Indian exchanges usually handle it for you, but if you use foreign exchanges, you’ll need to do it yourself.

Important Restrictions: Crypto losses can’t offset gains from other investments or income sources. You can’t even use a loss from one crypto to offset gains from another.

Airdrops, Staking, and Mining Rewards

Free crypto from airdrops, staking, or mining? You’re on the hook for 30% tax on the fair market value as soon as you receive it.

Airdrops: If tokens are tradeable on exchanges, you pay tax on their fair market value when you get them. If not, no immediate tax. The value on the day you receive them is what counts.

Staking Rewards: Staking income gets taxed at 30% as soon as you receive rewards. The APR tells you how much you’re earning for the year. Just moving coins to staking pools isn’t taxable.

Mining Income: Mining rewards get taxed at 30% on their fair market value when received. For future sales, the cost of acquisition is considered zero. Miners can’t deduct electricity, equipment, or infrastructure costs.

If you sell these assets later, the previously taxed amount becomes your cost basis for any extra gains.

Crypto Used as Salary or Payment

If you receive crypto as payment for services or salary, that’s taxable income—either under normal tax rules or the 30% VDA rate.

Salary Payments: Crypto paid as salary gets taxed at your regular slab rate. Employers handle TDS and include crypto payments in Form 16.

Service Payments: Freelancers or service providers who get paid in crypto pay 30% tax on the fair market value. The payer must deduct 1% TDS if the payment crosses the threshold.

Spending Crypto: If you use crypto to buy goods or services, you trigger a taxable event. The difference between your purchase price and the current market value gets taxed at 30%.

The recipient figures out fair market value using exchange rates on the transaction date.

Gifts and Inherited Crypto Assets

Crypto gifts follow standard gift tax rules, with some special exemptions for family members.

Gift Recipients: If you get crypto as a gift from a non-relative and it’s worth more than ₹50,000, you pay tax at your normal slab rate on the fair market value the day you receive it.

Exempt Gifts:

Gifts from specified relatives (parents, siblings, spouse, children)

Wedding gifts

Inheritance through wills

Gifts received in contemplation of death

Gift Givers: If you give crypto as a gift, you don’t have to pay tax right away. But if the crypto goes up in value before you gift it, the recipient uses your original purchase cost when they sell.

Valuation Method: Fair market value is set using Rule 11UA guidelines, based on exchange prices the day the gift is given.

Compliance, Calculation, and Reporting

You’ll need to track every crypto transaction and figure out gains or losses at the 30% tax rate. File returns under Schedule VDA—skipping this can lead to hefty penalties.

How to Calculate Crypto Tax Liability

The basic formula for figuring out your crypto tax is simple: Sale Price minus Cost Price equals Taxable Gain. India taxes all gains from VDAs at a flat 30% rate, plus 4% cess.

When you’re calculating your gains, you can only subtract your original purchase cost. Unfortunately, you can’t deduct trading fees, electricity for mining, or other infrastructure costs. That’s just how the rules are set up.

Different transaction types have their own tax rules:

Trading/Selling: 30% tax on the difference between sale and purchase price

Crypto-to-crypto swaps: Both sides count as separate taxable events

Mining: The fair market value when you receive the coins is taxed at 30%

Staking rewards: Income taxed at 30% when you get it

Airdrops: Fair market value at the time you receive them is taxable

For mined cryptocurrency, the cost basis is zero. So, the whole fair market value gets taxed when you receive it. Not ideal, but that’s the current setup.

Crypto Tax Calculator Tools

Crypto bookkeeping software really helps when you’ve got transactions scattered across different exchanges and wallets. These tools pull in your transaction data automatically and spit out the reports you need.

Key features of crypto tax calculators:

Automatic data import from major Indian and global exchanges

Transaction categorization for deposits, withdrawals, trades, staking—you name it

Capital gains report generation for your tax filing

Closing balance verification so your actual holdings match up

Platforms like ClearTax hook directly into crypto exchanges. This automation cuts down on manual mistakes and helps keep your tax numbers accurate.

The software usually recognizes transaction types by itself. You’ll only need to manually sort out the few entries it can’t classify.

Filing Process for Crypto Income

You’ve got to report your crypto income under Schedule VDA in your Income Tax Return. All crypto transactions get sorted into three income heads, depending on what you’re doing.

Capital gains cover VDAs held as investments. Business income is for frequent traders. Income from other sources picks up gifts, airdrops, and similar stuff.

It’s important to keep detailed records of every crypto transaction—purchase dates, sale dates, amounts, and the fair market value at each transaction.

You’ll need documentation like:

Exchange transaction history

Wallet transaction records

Proof of fair market value on transaction dates

TDS certificates from exchanges or buyers

The filing deadline is the same as the usual income tax return deadline. If you missed declaring crypto income, you can file a revised return later under Section 139(8A).

Penalties for Non-Compliance

The Indian government’s penalties for crypto tax non-compliance are pretty strict. Fines can go up to 70% of the tax amount for serious cases.

Penalty structure:

Late filing: Standard income tax penalties

Under-reporting: Extra tax plus penalty charges

Non-disclosure: Heavy penalties up to 70% of tax due

TDS non-compliance: Interest and penalties for buyers

If you don’t report your crypto income, tax authorities can scrutinize your filings. They have access to exchange data and can cross-check what you’ve reported.

TDS compliance is mandatory for transactions above certain limits. Buyers have to deduct 1% TDS and deposit it with the government within the required timeframe.

Non-resident transactions might have different TDS rules, but you still need to comply to avoid penalties and legal headaches.

Frequently Asked Questions (FAQs)

India’s crypto tax rules include a flat 30% tax on gains, 1% TDS on qualifying transactions, and specific reporting for all virtual digital assets. Trading, P2P, and derivatives all have their own quirks under the current setup.

What is the legal framework governing the taxation of cryptocurrencies in India?

The Indian government brought in the Virtual Digital Asset (VDA) framework in Budget 2022 to tax cryptocurrencies. This law covers any digital asset using blockchain or distributed ledger tech.

Section 115BBH of the Income Tax Act slaps a flat 30% tax on crypto gains, with surcharge and cess added on top.

Section 194S says there’s a 1% TDS on crypto transactions if they cross certain thresholds in a financial year.

Budget 2025 widened the VDA net to include things like NFTs, utility tokens, and other blockchain-based assets.

How is the income from cryptocurrency trading taxed in India?

No matter how long you hold, all crypto gains get hit with a 30% flat tax. The authorities treat crypto gains as income from other sources, not capital gains.

You can’t deduct anything except your original purchase cost. Transaction fees, trading costs, all of that—no deductions allowed right now.

Crypto losses don’t offset gains from other income. Even losses from one crypto can’t offset gains from another.

The government taxes you only when you sell or transfer your crypto. Just holding onto it doesn’t create any tax bill.

Can you provide a step-by-step guide for calculating the tax on cryptocurrency gains?

Step 1: Figure out the sale value for the crypto transaction. That’s the total you got from selling.

Step 2: Subtract what you originally paid. The acquisition cost is what you paid when you bought the crypto.

Step 3: Apply the 30% tax rate to your gain. Add surcharge and 4% cess to get the full tax amount.

Step 4: If TDS was already deducted, subtract that from the total tax in step 3.

What are the tax implications for engaging in peer-to-peer (P2P) cryptocurrency transactions?

P2P crypto transactions get taxed at the same 30% rate as trades on exchanges. The tax kicks in when you sell crypto directly to someone else.

If you’re buying in a P2P deal and the transaction is big enough, you have to deduct 1% TDS. For salaried folks, that’s on transactions above ₹10,000 per year.

Business owners and traders face the 1% TDS if their P2P crypto deals go over ₹50,000 in a financial year. This is for total crypto volume, not just single trades.

Both sides need to keep proper records—transaction dates, amounts, and who was involved—for tax reporting.

What TDS rate applies to cryptocurrency transactions, and how must it be reported?

The TDS rate for crypto transactions is 1% under Section 194S. It’s on the total transaction value, not just the profit.

Salaried individuals have to deal with TDS if their total crypto dealings go above ₹10,000 in a year, whether buying or selling.

For business owners and traders, the threshold is ₹50,000 per year, based on their total crypto trading volume.

Taxpayers need to report TDS details in their income tax returns. You can claim credit for TDS amounts when you’re working out your final tax bill.

Are there any specific guidelines for taxation on future and options trading in cryptocurrencies?

Crypto futures and options trading use the same 30% flat tax rate as spot trading. So, if you earn gains from derivative contracts, you'll face the same tax treatment.

If you have settlement differences from futures contracts, you'll need to report that as income from other sources. The 30% rate hits your net gains from these settlements.

If you're an options seller and your contracts expire worthless, you'll have to pay 30% tax on the premium you received. On the other hand, buyers can claim the premium as their acquisition cost if they actually exercise the options.

TDS rules kick in for crypto derivatives trading when your transaction values cross certain thresholds. In those cases, exchanges will deduct 1% TDS on qualifying derivative transactions.