If you bought, sold, or swapped any cryptocurrency this year, the taxman already has an opinion about it. Since 2022, India taxes gains from crypto and other Virtual Digital Assets under a dedicated set of rules that sit apart from the rest of the Income Tax Act. There is no indexation, no loss set-off, and only one flat rate that applies whether you held a coin for a day or three years.

This guide walks through exactly how crypto is taxed in India for the 2026 filing season: the 30% tax under Section 115BBH, the 1% TDS under Section 194S, how GST applies to exchanges, and how to actually fill in Schedule VDA when you file your return.

1. What Counts as a Virtual Digital Asset (VDA) Under Indian Tax Law?

The Finance Act 2022 inserted a formal definition of Virtual Digital Assets into the Income Tax Act. This single definition covers a wide range of digital assets, not just cryptocurrency:

•      Cryptocurrencies such as Bitcoin, Ethereum, Solana, and stablecoins

•      Non-Fungible Tokens (NFTs), including art, collectibles, and gaming assets

•      Tokens issued on a blockchain that represent a right, value, or asset

•      Any other digital asset the government notifies from time to time

Excluded: Gift cards, mileage points, and any digital representation of the Indian Rupee issued by the RBI (such as the e-Rupee) are specifically kept outside the VDA definition and are not taxed under these provisions.

 2. Section 115BBH: The Flat 30% Tax on Crypto Gains

 This is the single most important rule in Indian crypto taxation. Unlike shares or mutual funds, there is no short-term or long-term distinction for crypto. Whether you sold a coin you bought yesterday or one you held for five years, the rate is the same 30%.

How the tax is computed

Tax payable = 30% × (Sale consideration − Cost of acquisition). No other deduction is permitted, not even brokerage, exchange fees, or internet and electricity costs incurred to trade or mine the asset.

 

 3. Section 194S: 1% TDS on Every Crypto Transaction

 

TDS under Section 194S is deducted at the time of credit or payment, whichever is earlier, and is meant to create a paper trail so the department can track crypto transactions even before the return is filed. Most Indian exchanges deduct this automatically before settling your sale proceeds.

 

 4. Gifts, Mining, Staking, and Salary Paid in Crypto

Crypto gifts

If the total value of crypto (and other movable property) received as a gift in a financial year exceeds ₹50,000, the entire amount becomes taxable as income from other sources under Section 56(2)(x), unless the gift is from a specified relative such as a parent, spouse, or sibling, in which case it stays exempt.

Mining and staking rewards

Coins earned through mining or staking are treated as income at their fair market value on the date of receipt, taxed at the applicable slab rate (or as business income if mining is carried on as a business). When those same coins are later sold, the sale is taxed separately at 30% under Section 115BBH. Treatment of the cost of acquisition for mined coins has been debated, so it is best to get this documented carefully with a tax professional before filing.

Salary or freelance payments in crypto

If an employer or client pays you in crypto instead of rupees, that receipt is taxed as salary or business/professional income at slab rate based on its rupee value on the date of receipt. Any later sale of that crypto is again taxed at 30% on the gain over that already-taxed value. 

5. GST on Cryptocurrency Exchanges and Trading Platforms

 Crypto exchanges operating in India register under GST like any other service provider and charge 18% GST on their platform fee, not on the value of the crypto being traded. So if you pay ₹100 in trading fees on an exchange, roughly ₹18 of that is GST, shown separately on your trade confirmation or invoice.

If you run a business that accepts crypto payments or provides services related to VDA trading, you may need to check your GST registration requirements to stay compliant on the services side, separate from the income tax treatment of the crypto itself.

6. How to Report Crypto Income in Your ITR (Schedule VDA) for AY 2026-27

 

You cannot file ITR-1 (Sahaj) or ITR-4 (Sugam) if you have any income from Virtual Digital Assets, even a small amount. Here is how to pick the right form and fill it in:

•      Salaried individual with only salary + crypto gains → use ITR-2

•      Individual with business or professional income + crypto gains → use ITR-3

•      Report every transaction separately in Schedule VDA, not as a single netted figure

•      Reconcile the TDS shown in Form 26AS and AIS against what your exchange deducted under Section 194S

•      Keep exchange-wise transaction statements for at least 6 years in case of scrutiny

7. Penalties for Not Disclosing Crypto Income

The department receives transaction-level data directly from Indian exchanges through TDS filings under Section 194S, so unreported crypto gains are increasingly easy to detect through data matching with your ITR and AIS.

 8. India's Crypto Tax Regime vs Other Countries

 

9. Why This Matters: A Practitioner's Note

In practice, the biggest mistakes we see are not about the tax rate itself, most taxpayers know it is 30%. The mistakes happen around loss set-off (trying to net a losing trade against a winning one), missing TDS reconciliation, and skipping disclosure of small peer-to-peer transfers that never touched an Indian exchange. Each of these is an easy fix if you catch it before filing, and a genuinely painful one if a notice arrives first.

For related compliance work, our related guides on ITR filing for AY 2026-27 and legal advisory on digital asset disputes cover adjacent areas worth reading alongside this one.

10. Conclusion: Getting Crypto Tax Right in 2026

Crypto taxation in India is unforgiving on flexibility but simple in structure: a flat 30% on every gain, 1% TDS to track transactions, and zero tolerance for netting losses against profits. The safest approach is to maintain transaction-wise records from every exchange and wallet you use, reconcile TDS every quarter instead of scrambling at filing time, and treat gifts, staking rewards, and salary paid in crypto as separate taxable events with their own valuation date.

Frequently Asked Questions

Is cryptocurrency legal in India in 2026?

Cryptocurrency is not banned in India. It is not legal tender either, but the government taxes gains from Virtual Digital Assets (VDA) under Section 115BBH, which confirms that crypto trading and holding is permitted and regulated for tax purposes.

What is the tax rate on cryptocurrency in India?

Gains from transfer of any Virtual Digital Asset, including Bitcoin, Ethereum, and NFTs, are taxed at a flat 30% under Section 115BBH, plus applicable surcharge and 4% health and education cess.

Can I set off crypto losses against other income?

No. Losses from one VDA cannot be set off against gains from another VDA, and crypto losses cannot be set off against salary, business, or capital gains income from other sources. Carry forward to future years is also not allowed.

What is Section 194S and when does TDS apply?

Section 194S requires the buyer to deduct 1% TDS on the transfer of a VDA if the transaction value crosses the prescribed threshold in a financial year, ₹50,000 for specified persons and ₹10,000 for others.

Who counts as a 'specified person' for the ₹50,000 TDS threshold?

A specified person is generally an individual or HUF whose business turnover does not exceed ₹1 crore, or professional receipts do not exceed ₹50 lakh, in the preceding financial year, and who has no business or professional income.

Is GST applicable on cryptocurrency trading?

GST is not charged on the crypto asset itself, but exchanges and platforms charge 18% GST on the trading fee, commission, or convenience charge they collect from users for facilitating the transaction.

How do I report crypto income in my ITR?

Crypto gains are reported in Schedule VDA of ITR-2 or ITR-3, with transaction-wise details of the date of acquisition, date of transfer, cost of acquisition, and sale consideration for each Virtual Digital Asset.

Which ITR form should I use if I have crypto income?

You cannot use ITR-1 or ITR-4 if you have VDA income. Salaried individuals with crypto gains use ITR-2, and those with business or professional income along with crypto gains use ITR-3.

Is crypto received as a gift taxable?

Yes. Crypto received as a gift is taxable in the recipient's hands under Section 56(2)(x) as income from other sources if the total value of gifts received in a year exceeds ₹50,000, unless received from a specified relative.

How are staking rewards and mining income taxed?

Staking or mining rewards are first taxed as income from other sources or business income at slab rate based on fair market value when received, and any later sale of those coins is separately taxed at 30% under Section 115BBH.

Do I have to pay tax if I only hold crypto and haven't sold it?

No. Tax under Section 115BBH is triggered only on transfer, meaning sale, swap, or spending of the VDA. Simply holding crypto without any transfer does not create a tax liability in that year.

Is swapping one cryptocurrency for another taxable?

Yes. Swapping one VDA for another, for example Bitcoin for Ethereum, is treated as a transfer and is taxable at 30% on the gain, even though no fiat currency changed hands.

What happens if I don't disclose crypto income in my ITR?

Non-disclosure can attract a penalty of 50% to 200% of the tax on underreported income under Section 270A, and in cases involving foreign exchange holdings, exposure under the Black Money Act, which carries more severe penalties and prosecution risk.

Can I claim expenses like electricity or exchange fees against crypto gains?

No. Section 115BBH allows deduction only for the cost of acquisition of the VDA. Expenses such as electricity for mining, internet costs, or infrastructure costs cannot be deducted.

Do NRIs trading in Indian crypto exchanges pay the same 30% tax?

NRIs are taxed at the same flat 30% rate on gains from VDA transfers routed through Indian exchanges, and TDS under Section 194S applies in the same manner, subject to any relief available under an applicable Double Taxation Avoidance Agreement.

 

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