Last updated: 2026
Author: EDITORIAL TEAM
Affiliate disclosure: This page may contain links to crypto exchanges, portfolio trackers, accounting software or tax services. We may receive a commission when a reader uses an eligible link, at no additional cost to the reader. Commercial relationships do not change the tax rules, risks or editorial conclusions explained in this guide.
Tax and financial disclaimer: This guide provides general educational information and is not personal tax, legal, accounting or investment advice. Indian crypto taxation can depend on the transaction structure, taxpayer status, residency, source of income and records available. Consult a practising Chartered Accountant or qualified tax professional before filing an income-tax return or responding to a tax notice.
Quick Answer: How Is Crypto Taxed in India in 2026?
Income from transferring a Virtual Digital Asset, or VDA, is generally taxed at a special rate of 30%, plus applicable surcharge and the 4% Health and Education Cess. Only the permitted cost of acquisition can ordinarily be deducted when calculating taxable VDA income. Most other expenses and any VDA transfer loss cannot be set off against taxable income or carried forward.
A separate 1% Tax Deducted at Source, commonly called crypto TDS, generally applies to consideration paid to a resident for transferring a VDA once the relevant annual threshold is crossed. TDS is calculated on the transaction consideration, not on the investor’s profit.
Selling crypto for INR is not the only taxable event. Exchanging Bitcoin for USDT, spending crypto on a product, swapping tokens on a decentralised exchange and disposing of an NFT can also represent taxable transfers.
For returns relating to the financial year ending 31 March 2026, taxpayers continue to use the Income-tax Act, 1961 framework, including Section 115BBH, Section 194S and Schedule VDA. From 1 April 2026, the Income-tax Act, 2025 applies to the new tax year, with updated section numbering and forms. The substantive 30% VDA tax and 1% TDS framework remain relevant in 2026.
The central rules can be summarised as follows:
| Crypto tax rule | Position in 2026 |
|---|---|
| Tax on income from VDA transfers | 30% |
| Health and Education Cess | 4% of calculated income tax |
| Surcharge | May apply based on total income and taxpayer status |
| TDS on VDA consideration | 1% |
| Main deductible amount | Permitted cost of acquisition |
| Set-off of VDA transfer losses | Not allowed |
| Carry-forward of VDA transfer losses | Not allowed |
| Reporting in the return | Transaction-wise Schedule VDA reporting |
| Tax on crypto-to-crypto swaps | Usually applicable when a VDA is transferred |
| TDS credit | Claimable after reconciliation with tax records |
The original tax framework supplied for this guide correctly identifies Section 115BBH, Section 194S, the 30% special rate, loss restrictions and transaction-wise VDA reporting as the central compliance issues.
The Important 2026 Transition: Financial Year, Assessment Year and Tax Year
The year 2026 is unusually important because two income-tax frameworks meet during the calendar year.
Transactions up to 31 March 2026
Income earned or crypto transferred between 1 April 2025 and 31 March 2026 belongs to Financial Year 2025–26. The corresponding return is filed for Assessment Year 2026–27 under the Income-tax Act, 1961.
For this period, taxpayers will commonly encounter:
- Section 115BBH for the special tax on VDA income.
- Section 194S for 1% TDS on VDA consideration.
- Form 26QE in applicable PAN-based TDS situations.
- AIS and Form 26AS for information and tax-credit reconciliation.
- Schedule VDA in ITR-2 or ITR-3.
Transactions from 1 April 2026
The Income-tax Act, 2025 became applicable from 1 April 2026. The period from 1 April 2026 to 31 March 2027 is referred to as Tax Year 2026–27 under the new framework.
The TDS provision for VDA transfers is placed in Section 393(1), Table Serial Number 8(vi), of the Income-tax Act, 2025. It retains a 1% rate and the familiar ₹50,000 and ₹10,000 threshold structure.
A practical procedural change is that Form 141 replaces Form 26QE for qualifying PAN-based transactions occurring under the new Act. Schedule D of Form 141 is specifically designed for TDS on transfers of Virtual Digital Assets by an individual or HUF.
This date distinction matters. A transaction completed on 30 March 2026 and a transaction completed on 2 April 2026 may follow the same broad tax principles but use different statutory references, tax periods and payment forms.
What Is a Virtual Digital Asset?
Indian tax law uses the expression Virtual Digital Asset rather than relying only on the word cryptocurrency.
VDAs broadly cover:
- Bitcoin, Ether and other cryptocurrencies.
- Stablecoins such as USDT and USDC.
- Eligible crypto tokens.
- Notified non-fungible tokens.
- Other notified digital assets.
- Crypto-assets relying on cryptographically secured distributed-ledger or similar technology.
The definition was expanded with effect from 1 April 2026 to expressly include crypto-assets that use cryptographically secured distributed-ledger technology or similar technology to validate and secure transactions.
The VDA tax category does not automatically include every digital item. Indian currency, foreign currency and the Reserve Bank of India’s Central Bank Digital Currency are excluded from the VDA definition. Gift cards, loyalty points and certain subscription-related digital items have also been excluded through notifications.
Taxation of a crypto-asset does not make it Indian legal tender. Tax classification, exchange regulation, anti-money-laundering compliance and legal-tender status are separate questions. The digital rupee issued by the RBI is legal tender; privately issued cryptocurrencies are not the same as the RBI’s e₹.
The 30% Crypto Tax Rate Explained
Under the VDA framework, taxable income from a transfer is generally calculated as:
Taxable VDA income = Full value of consideration − permitted cost of acquisition
The taxable positive amount is then subject to:
- 30% income tax.
- Applicable surcharge, where relevant.
- 4% Health and Education Cess on the calculated tax and surcharge.
Without surcharge, a 30% tax plus 4% cess produces an effective charge of 31.2% of taxable VDA income.
For example:
- Taxable VDA income: ₹1,00,000
- Income tax at 30%: ₹30,000
- Cess at 4% of ₹30,000: ₹1,200
- Total: ₹31,200
This does not mean 31.2% of the total sale proceeds is always payable. The special tax applies to the taxable positive income after deducting the permitted cost of acquisition.
The Income Tax Department’s current Schedule VDA guidance states that VDA income is calculated without deductions other than cost of acquisition and is taxed at 30%, plus surcharge and cess.
Does your income-tax slab change the 30% rate?
Ordinary income such as salary, rent or interest may be taxed according to the applicable slab or special rule. Positive income from transferring a VDA is placed under the VDA special-rate framework.
Your complete return can still be affected by:
- Other sources of income.
- Whether you use the old or new tax regime for eligible ordinary income.
- Surcharge.
- Cess.
- TDS credits.
- Advance tax already paid.
- Residency status.
- The final rules built into the applicable return utility.
Do not calculate the entire return by multiplying total income by 30%. The special rate applies to taxable VDA transfer income, while other income may be taxed differently.
What Can Be Deducted From Crypto Income?
The law permits the cost of acquisition, if any, to be considered when calculating income from a VDA transfer.
In the simplest purchase-and-sale transaction, cost of acquisition is the INR amount paid to acquire the asset.
Suppose you buy Ether for ₹1,20,000 and later sell it for ₹1,70,000:
- Sale consideration: ₹1,70,000
- Cost of acquisition: ₹1,20,000
- Taxable VDA income: ₹50,000
The special rule does not provide a general deduction for every expense connected with crypto activity. The following items should not automatically be deducted as ordinary expenses:
- Portfolio-tracking subscriptions.
- Tax-software subscriptions.
- Trading-bot charges.
- Internet or electricity expenses.
- Interest on money borrowed to buy crypto.
- Advisory fees.
- Wallet expenses.
- Transfer gas paid during disposal.
- General exchange or brokerage expenses.
Whether a particular amount is legally included in cost of acquisition rather than treated as a separate expense can depend on how the acquisition was structured and documented. Taxpayers should avoid inventing an expanded cost basis merely because an amount appears in an exchange statement.
Section 115BBH expressly blocks deductions for expenditure other than cost of acquisition and blocks loss set-off or carry-forward.
The No-Loss-Set-Off Rule
The treatment of losses is one of the most important and frequently misunderstood parts of crypto tax in India.
A loss from transferring a VDA cannot ordinarily be:
- Set off against salary income.
- Set off against interest income.
- Set off against property income.
- Set off against share-market gains.
- Set off against business income.
- Carried forward to a later year.
- Used to reduce another positive VDA transfer amount in Schedule VDA.
Current Schedule VDA guidance requires a transaction producing a loss to be reported as nil for the positive-income calculation. The total of positive transaction amounts is carried forward in the return.
Worked example: profit on two coins and loss on another
An investor completes the following transactions:
| Asset | Purchase price | Sale price | Result |
| Bitcoin | ₹2,00,000 | ₹3,50,000 | ₹1,50,000 profit |
| Ether | ₹1,50,000 | ₹90,000 | ₹60,000 loss |
| Solana | ₹50,000 | ₹80,000 | ₹30,000 profit |
The investor’s economic result is:
₹1,50,000 − ₹60,000 + ₹30,000 = ₹1,20,000 net profit
However, the ₹60,000 Ether loss does not reduce the positive Bitcoin and Solana amounts.
Taxable VDA income:
₹1,50,000 + ₹30,000 = ₹1,80,000
Tax calculation without surcharge:
- 30% of ₹1,80,000: ₹54,000
- 4% cess: ₹2,160
- Total: ₹56,160
Although the investor earned a net economic profit of ₹1,20,000, the tax of ₹56,160 equals 46.8% of that economic profit. This is why trade-by-trade records are essential.
Complete Crypto Taxable-Event Table
The following table provides a practical starting point. Complex DeFi, gift, mining and reward arrangements may require professional analysis.
| Transaction | Is it normally a taxable transfer? | Practical tax treatment |
| Buying crypto with INR | Usually no transfer by the buyer | Establishes acquisition cost |
| Holding crypto without selling | No transfer merely from holding | Keep purchase and wallet records |
| Selling crypto for INR | Yes | Sale value minus permitted acquisition cost |
| Swapping BTC for ETH | Yes | BTC disposal valued in INR at swap time |
| Swapping a token for USDT | Yes | Token disposal can generate taxable income |
| Spending crypto on goods | Yes | Crypto is disposed of for value received |
| Paying a service provider in crypto | Yes | Disposal value must be determined in INR |
| Transferring between your own wallets | Normally not a disposal if ownership does not change | Preserve addresses and transaction hashes |
| Giving crypto to another person | Donor and recipient consequences differ | Gift exemptions and cost rules must be checked |
| Receiving an airdrop | May create receipt-stage and sale-stage consequences | Record fair market value and later disposal |
| Receiving staking rewards | Treatment can depend on facts | Record value on receipt and later sale |
| Receiving mining rewards | Special analysis required | Keep hardware, wallet and valuation records |
| Selling an NFT | Usually a VDA transfer | Consideration minus eligible acquisition cost |
| Wrapping or bridging tokens | Potential transfer issue | Do not assume it is tax-neutral |
| Supplying tokens to a liquidity pool | Potentially taxable | Token and LP-token ownership changes require review |
| Redeeming an LP token | Potentially taxable | Record INR values for all assets received |
| Losing private keys | No sale proceeds, but deduction may be unavailable | Preserve evidence of the loss |
| Crypto stolen in a hack | Deductibility is highly restricted | Do not claim an unsupported offset |
| Closing an exchange account | Not itself taxable | Withdrawals or conversions may be taxable |
Taxable Event 1: Selling Crypto for INR
Selling crypto into INR is the most recognisable taxable event.
Example
You purchase Bitcoin for ₹4,00,000 and sell it for ₹5,25,000.
- Consideration: ₹5,25,000
- Acquisition cost: ₹4,00,000
- Positive VDA income: ₹1,25,000
- Tax at 30%: ₹37,500
- Cess at 4%: ₹1,500
- Total before surcharge and other return adjustments: ₹39,000
The exchange may also deduct 1% TDS from the gross sale consideration. That TDS is a credit and not the final calculation of your profit.
Taxable Event 2: Crypto-to-Crypto Swaps
A common misconception is that tax arises only when money reaches an Indian bank account. A crypto-to-crypto swap can represent a disposal even though no INR is withdrawn.
Example: Bitcoin exchanged for Ether
An investor buys one Bitcoin for ₹30,00,000. Months later, Bitcoin is worth ₹45,00,000, and the investor swaps the Bitcoin for 15 ETH.
The Bitcoin disposal is valued at ₹45,00,000:
- INR value of Bitcoin at transfer: ₹45,00,000
- Bitcoin acquisition cost: ₹30,00,000
- Taxable Bitcoin income: ₹15,00,000
- Tax at 30%: ₹4,50,000
- Cess at 4%: ₹18,000
- Total before surcharge: ₹4,68,000
No INR entered the investor’s bank account, but a taxable transfer still occurred.
The INR value used for the swap should also be preserved when establishing the acquisition record for the ETH received. The valuation source, exchange rate, timestamp and trading pair should be documented.
Taxable Event 3: Stablecoin Trades
USDT, USDC and similar assets are not automatically tax-neutral merely because their price is designed to track a fiat currency.
Examples that may create a taxable transfer include:
- Bitcoin to USDT.
- USDT to Ether.
- USDC to another stablecoin.
- Stablecoin spent through a crypto card.
- Stablecoin used to purchase an NFT.
A USDT transaction with only a small price difference can still require reporting. Stablecoin users often create hundreds or thousands of reportable entries because they treat USDT as cash rather than as another digital asset.
Taxable Event 4: Spending Crypto
Using crypto to buy a phone, pay a freelancer, purchase a subscription or settle an invoice can involve a VDA transfer.
Suppose you bought crypto for ₹40,000 and later use it to buy a laptop worth ₹65,000.
The practical calculation may be:
- Value received: ₹65,000
- Acquisition cost of crypto transferred: ₹40,000
- Positive VDA income: ₹25,000
- Tax at 30%: ₹7,500
- Cess: ₹300
- Total before other adjustments: ₹7,800
The purchase of the laptop and the tax on the crypto disposal are separate matters.
Staking Rewards and Yield Income
Staking creates two potentially separate tax points:
- Receipt of the reward.
- Later transfer of the rewarded tokens.
Indian law does not provide a single simple answer for every staking protocol. Custodial staking, validator rewards, liquid-staking tokens and DeFi yield arrangements may have different legal characteristics.
A cautious recordkeeping approach is to capture:
- Date and time each reward was received.
- Number of tokens.
- INR fair market value at receipt.
- Exchange or valuation source.
- Wallet address.
- Lock-up conditions.
- Date and value of the later disposal.
Illustrative staking example
An investor receives 10 tokens when each token is worth ₹1,000.
- Recorded value at receipt: ₹10,000
- Tokens are later sold for ₹15,000
- If ₹10,000 is accepted as their acquisition value, the later positive VDA income is ₹5,000
- 30% tax on ₹5,000: ₹1,500
- 4% cess: ₹60
- Total tax on the later transfer: ₹1,560
Any tax that may apply at receipt is a separate calculation. The precise head of income and acquisition value should be confirmed with a tax professional.
Airdrops and Promotional Tokens
An airdrop may have tax consequences when it is received and again when it is transferred.
Virtual Digital Assets are included within the movable-property rules for gifts and deemed income. Receipt without consideration may become taxable where the statutory conditions and ₹50,000 rule are met, unless an exemption applies.
For each airdrop, record:
- Token name and contract address.
- Date of receipt.
- Quantity.
- INR fair market value.
- Reason for receipt.
- Whether any service or activity was required.
- Value and date of a later sale or swap.
Do not assume that an unsolicited token has meaningful market value. Scam tokens and illiquid airdrops can display artificial prices. A defensible valuation should rely on genuine market evidence.
Gifts of Cryptocurrency
Crypto gifts require separate analysis for the giver and receiver.
The recipient may face deemed-income taxation when a VDA is received without consideration and the applicable value crosses the statutory threshold. Exemptions can apply to qualifying gifts from relatives, gifts received on marriage, inheritance and certain other specified circumstances.
For the recipient’s later sale, acquisition-cost rules may depend on whether the gift was exempt, taxed on receipt or inherited from a previous owner. The Schedule VDA instructions include specific treatment for assets received as gifts, so the original owner’s purchase documents should be retained.
A proper gift record should include:
- Donor and recipient details.
- PAN details where appropriate.
- Relationship between the parties.
- Date of transfer.
- Wallet addresses and transaction hash.
- Token quantity.
- Fair market value.
- Donor’s original acquisition documents.
- Written gift declaration.
- Reason an exemption is claimed.
NFTs
A notified NFT can fall within the VDA tax framework.
NFT-related taxable events may include:
- Selling an NFT for INR.
- Selling an NFT for Ether.
- Exchanging one NFT for another.
- Receiving an NFT as compensation.
- Receiving an NFT as a gift.
- Using an NFT in a transaction that changes beneficial ownership.
The relevant acquisition cost may be more complicated for creators. Minting fees, platform charges, royalties and artistic production costs should not automatically be treated as deductible acquisition costs under Section 115BBH.
NFT creators and frequent traders may also need advice on business-income classification, GST and cross-border payments in addition to VDA income tax.
DeFi, Wrapped Tokens, Bridges and Liquidity Pools
Decentralised-finance transactions can produce multiple transfers even when the investor believes assets have only been “moved.”
Potentially reportable events include:
- ETH exchanged for wrapped ETH.
- Bitcoin exchanged for wrapped Bitcoin.
- Tokens deposited in exchange for an LP token.
- LP tokens redeemed for two underlying assets.
- Collateral liquidated by a lending protocol.
- Reward tokens claimed.
- Governance tokens swapped.
- Assets bridged into representations on another chain.
There is not always transaction-specific administrative guidance for every protocol design. The safest approach is not to label every smart-contract interaction tax-free.
For each transaction, ask:
- Did beneficial ownership change?
- Was one asset surrendered for a different token?
- Did the user receive an independently transferable token?
- Was there a measurable INR market value?
- Did a liquidation transfer collateral?
- Was any reward or fee received?
- Can the transaction be matched to a later disposal?
Complex DeFi users should preserve raw blockchain data rather than relying only on a year-end tax report.
Transfers Between Your Own Wallets
Moving assets from your exchange account to a hardware wallet, or between two wallets you own, should not ordinarily create income merely because the tokens moved on-chain.
However, the taxpayer must be able to demonstrate continued ownership.
Keep:
- Sending wallet address.
- Receiving wallet address.
- Transaction hash.
- Exchange withdrawal statement.
- Wallet screenshots or ownership records.
- Network fee.
- Date and time.
- Any memo or destination tag.
Without these records, a wallet transfer can be mistaken for a disposal, payment or gift.
Lost, Stolen and Hacked Crypto
A financial loss does not automatically become a deductible tax loss.
Examples include:
- Lost seed phrase.
- Irrecoverable hardware wallet.
- Exchange insolvency.
- Phishing theft.
- Smart-contract exploit.
- Rug pull.
- Mistaken transfer to a wrong address.
Section 115BBH severely restricts deductions and loss set-off. Taxpayers should not claim the purchase value of stolen or inaccessible crypto as an ordinary deduction without a supportable legal position.
Preserve:
- Police or cybercrime complaint.
- Exchange correspondence.
- Wallet addresses.
- Transaction hashes.
- Security reports.
- Liquidation or insolvency documents.
- Evidence that access was permanently lost.
A tax professional can then consider whether another provision is relevant to the taxpayer’s facts.
How the 1% Crypto TDS Works
The 1% TDS rule is designed to collect tax information and an advance credit at the transaction stage.
The critical point is:
TDS is calculated on transaction consideration, not profit.
If crypto worth ₹5,00,000 is sold, the TDS may be ₹5,000 even if the seller’s actual gain is only ₹10,000—or even if the seller made an economic loss.
The current rule generally applies when consideration is paid to a resident for a VDA transfer. For the Income-tax Act, 1961 period, the governing provision is Section 194S. For transactions under the Income-tax Act, 2025, it appears in Section 393(1), Table Serial Number 8(vi).
TDS thresholds
No deduction is generally required while annual consideration remains within:
- ₹50,000 where the payer is a specified individual or HUF.
- ₹10,000 for other payers.
The specified-person category broadly includes an individual or HUF without business or professional income, or one whose preceding-year business or professional turnover remains within the prescribed limits.
Crossing a threshold does not mean only the profit becomes subject to TDS. The applicable rule works with the consideration paid for the transfer.
Who Deducts the TDS?
Responsibility depends on how the transaction is completed.
Indian exchange transaction
Where the exchange directly makes payment to the seller, the exchange may deduct and deposit the tax.
Users should still verify:
- PAN registered with the exchange.
- Gross sale value.
- TDS amount.
- Transaction date.
- Exchange tax report.
- AIS or Form 26AS credit.
Do not assume the exchange report and government statement will always match automatically.
Broker and exchange arrangement
Where a broker is involved, responsibility can depend on the agreement between the broker and exchange.
The CBDT framework allows agreed arrangements to prevent duplicate deduction, but the seller should preserve the TDS certificate and transaction statement.
Direct peer-to-peer transaction
In a direct transaction between an identified buyer and resident seller, the buyer may be responsible for deducting tax.
For eligible transactions completed on or before 31 March 2026, a specified individual or HUF may use Form 26QE. For transactions from 1 April 2026 governed by the new Act, Form 141 and its VDA Schedule D apply in the relevant PAN-based situation.
Crypto-to-crypto exchange
Where consideration is wholly in kind or involves another VDA, the parties must ensure that the required tax has been paid before the consideration is released.
The rule should not be reduced to “both parties always deduct exactly 1%” without reviewing the exchange structure and applicable CBDT guidance. Exchange-facilitated and direct swaps can be handled differently.
Foreign exchanges and DEXs
A foreign platform may not deduct Indian TDS in the same manner as an Indian exchange. Using a foreign exchange, self-custody wallet or DEX does not automatically remove the Indian taxpayer’s obligations.
Determine:
- Whether the counterparty is resident.
- Whether the counterparty can be identified.
- Whether the transaction is exchange-facilitated.
- Which party is treated as the payer.
- Whether consideration is cash, kind or another VDA.
- Which form and reporting process applies.
Professional advice is especially important where the counterparty is unknown or non-resident.
TDS Is Not the Final Crypto Tax
TDS and final income tax are different calculations.
Consider this example:
- Crypto sale consideration: ₹5,00,000
- TDS at 1%: ₹5,000
- Original acquisition cost: ₹4,50,000
- Positive VDA income: ₹50,000
- 30% tax: ₹15,000
- Cess: ₹600
- Final VDA tax before other return adjustments: ₹15,600
- Less eligible TDS credit: ₹5,000
- Remaining amount: ₹10,600
The ₹5,000 TDS does not replace the ₹15,600 calculation. It is credited against the final tax liability after it is correctly reflected and claimed.
The opposite situation can also occur. If TDS exceeds the final liability after the full return is calculated, the taxpayer may be eligible for a refund, subject to processing and verification.
How to Reconcile Crypto TDS
A strong TDS reconciliation should use at least three sets of records:
- Exchange or platform statements.
- The taxpayer’s transaction ledger.
- Government tax-information statements.
Step 1: Download complete exchange records
Obtain:
- Order history.
- Trade history.
- Deposit and withdrawal history.
- TDS report.
- Tax invoice.
- Profit-and-loss report.
- Wallet-transfer report.
- Account statement.
CSV data is usually more useful than screenshots.
Step 2: Create an exchange-by-exchange summary
For each platform, total:
- Gross INR sale consideration.
- Crypto-to-crypto disposal value.
- TDS deducted.
- Number of disposal transactions.
- Deposits.
- Withdrawals.
- Closing balances.
Step 3: Review Form 26AS and AIS
Form 26AS primarily displays TDS and TCS information. AIS provides a broader information view and allows taxpayers to submit feedback on reported items.
Check:
- Deductor name.
- Deductor identification.
- Section or payment category.
- Amount paid or credited.
- Tax deducted.
- Tax deposited.
- Tax period.
Step 4: Match transaction totals
Do not compare only annual TDS totals. Match by:
- Exchange.
- Month or quarter.
- Transaction value.
- TDS value.
- Tax year.
- PAN.
A difference can arise from cancelled orders, late deposits, incorrect PAN details, exchange reporting dates or duplicated records.
Step 5: Investigate missing credit
If an exchange deducted TDS but no credit appears:
- Confirm the PAN in the exchange account.
- Download the exchange’s TDS certificate.
- Raise a written support ticket.
- Ask whether a corrected TDS statement will be filed.
- Keep the ticket number and response.
- Do not claim an unsupported amount without documentation.
Step 6: Avoid double claiming
A tax aggregator may import the same exchange transaction from multiple sources. Check that the credit is not entered once from AIS and again from an exchange report.
Schedule VDA: How Crypto Is Reported in the ITR
Schedule VDA is the dedicated part of the income-tax return used to disclose income from transfers of Virtual Digital Assets.
The Income Tax Department requires transaction-wise information, including:
- Date of acquisition.
- Date of transfer.
- Head under which income is reported.
- Cost of acquisition.
- Consideration received.
- Positive income from the transfer.
Where a transaction produces a loss, the Schedule VDA computation treats the loss as nil for aggregation rather than allowing it to reduce another positive transaction.
Simplified Schedule VDA example
| Date acquired | Date transferred | Asset | Acquisition cost | Consideration | Schedule VDA amount |
| 10 May 2025 | 18 December 2025 | BTC | ₹1,50,000 | ₹2,10,000 | ₹60,000 |
| 12 June 2025 | 14 January 2026 | ETH | ₹80,000 | ₹50,000 | Nil for positive-income aggregation |
| 22 August 2025 | 2 February 2026 | SOL | ₹40,000 | ₹70,000 | ₹30,000 |
Total positive amount: ₹90,000
The ₹30,000 ETH loss does not reduce the ₹90,000 positive amount.
Which ITR Form Should Crypto Investors Use?
The correct return depends on the taxpayer’s complete income profile.
ITR-2
ITR-2 is generally relevant to an individual or HUF who has VDA or capital-gain income but does not have income from profits and gains of business or profession.
The Income Tax Department’s ITR-2 guidance includes a dedicated Schedule VDA.
ITR-3
ITR-3 is generally relevant where an individual or HUF has business or professional income.
This may be relevant where crypto activity is treated as a business or where the taxpayer has other business income. Trading frequency alone is not the only consideration. Volume, organisation, intention, accounting treatment and surrounding facts may matter.
ITR-1 and ITR-4
Taxpayers should not assume the simplified return forms are available merely because the VDA income is small. Review the current eligibility rules and return utility before selecting a form.
Choosing the wrong return can lead to validation errors, a defective-return notice or incomplete disclosure.
Capital Gains or Business Income?
Schedule VDA may require the taxpayer to identify the head under which VDA income is reported.
The classification can depend on:
- Frequency of trades.
- Holding period.
- Intention at acquisition.
- Accounting treatment.
- Source of funds.
- Scale and organisation.
- Whether trading is systematic.
- Whether the taxpayer provides crypto-related services.
- Whether tokens are held as investments or stock-in-trade.
The 30% special rate and loss restrictions may apply to VDA transfer income regardless of whether it is classified under capital gains or business income, but the classification can affect the return form, accounting obligations and other disclosures.
A Practical Crypto Tax Calculator
A basic crypto tax calculator should work transaction by transaction.
Formula for a profitable transaction
Positive VDA income = INR consideration − eligible acquisition cost
Base VDA tax = Positive VDA income × 30%
Cess = Base tax × 4%
Total before surcharge = Base tax + cess
Example
- Buy price: ₹2,40,000
- Sale value: ₹3,10,000
- Positive income: ₹70,000
- 30% tax: ₹21,000
- Cess: ₹840
- Total: ₹21,840
Formula for multiple transactions
Do not calculate:
Total proceeds − total purchases
Instead:
- Calculate each disposal separately.
- Identify every positive transaction.
- Treat non-allowable losses according to Schedule VDA.
- Add positive amounts.
- Apply the special rate.
- Add surcharge where applicable.
- Add cess.
- Subtract valid TDS and other tax credits.
Cost-Basis Methods and Partial Sales
When a taxpayer purchases the same token multiple times and later sells only part of the holding, the units sold must be matched to an acquisition cost using a supportable and consistently applied method.
Example
Purchases:
- 1 ETH for ₹1,40,000
- 1 ETH for ₹1,80,000
Later sale:
- 1 ETH for ₹2,00,000
The taxable result differs depending on which acquisition lot is treated as sold:
- Against ₹1,40,000 cost: ₹60,000 positive income.
- Against ₹1,80,000 cost: ₹20,000 positive income.
The statute and return instructions should be reviewed before selecting FIFO, specific identification or another method. The method should not be changed selectively to minimise tax after prices are known.
Retain exchange order IDs and wallet-level records supporting the chosen match.
Crypto Recordkeeping Checklist
A taxpayer should retain more than a year-end profit report.
Transaction records
- Date and time.
- Token name and symbol.
- Contract address where relevant.
- Quantity bought or sold.
- INR fair market value.
- Trading pair.
- Exchange order ID.
- Transaction hash.
- Wallet addresses.
- Fees.
- TDS.
- Counterparty information where available.
Acquisition evidence
- Bank statement.
- UPI record.
- Exchange deposit statement.
- Purchase confirmation.
- Previous owner’s records for gifts.
- Fair-market-value evidence for rewards.
Income records
- Staking report.
- Mining-pool statement.
- Airdrop details.
- Salary or invoice paid in crypto.
- Referral reward.
- Cashback or promotional token history.
Tax records
- AIS.
- Form 26AS or the applicable successor statement.
- TDS certificates.
- Form 26QE or Form 141 records.
- Advance-tax challans.
- Self-assessment-tax challans.
- Filed ITR and computation.
- Chartered Accountant working papers.
Security records
- Evidence of wallet ownership.
- Hardware-wallet transfer logs.
- Exchange-account ownership.
- Cybercrime report for theft.
- Exchange insolvency correspondence.
- Records of inaccessible private keys.
New Crypto Reporting Visibility in 2026
From 1 April 2026, the definition of VDA expressly includes a broader crypto-asset category, and the tax framework introduces more formal transaction reporting by prescribed reporting entities.
Section 285BAA requires prescribed reporting entities to furnish information about crypto-asset transactions. Under the Income-tax Act, 2025 structure, the forms list includes a new Form 167 for crypto-asset transaction reporting under Section 509.
This does not mean every investor personally files Form 167. It means taxpayers should expect increasing information matching between platforms, reporting entities and income-tax records.
The practical lesson is simple: do not file only the transactions that produced an INR bank withdrawal. Foreign-exchange trades, wallet swaps, NFTs, stablecoins and self-custody activity may leave records that can later be matched.
Common Crypto Tax Mistakes
Reporting only INR withdrawals
A transfer can occur before funds reach a bank. Crypto-to-crypto swaps and spending crypto may be taxable.
Treating TDS as final tax
The 1% deduction is a tax credit. It is not a substitute for calculating VDA income at the special rate.
Netting every profit and loss
Schedule VDA does not operate like a simple annual portfolio profit-and-loss account.
Deducting all fees and expenses
The law permits cost of acquisition, not a general deduction for every crypto-related expense.
Ignoring stablecoins
A stablecoin is not automatically INR or tax-free cash.
Ignoring foreign platforms
Using an overseas platform does not by itself remove Indian reporting obligations.
Reporting wallet transfers as sales
A movement between wallets owned by the same taxpayer should be documented and separated from genuine disposals.
Using the year-end price
Taxable transfers should use the INR value at the time of the transaction, not the token’s price on 31 March.
Failing to reconcile TDS
An exchange deduction is useful only when the taxpayer can match and claim the credit correctly.
Using unsupported automated reports
Tax software can misclassify bridges, internal transfers, wrapped tokens and liquidity-pool transactions. Review imported data before filing.
Changing transaction dates
Blockchain time may be in UTC while exchange statements may use IST. Apply a consistent time-zone process.
Filing the wrong ITR
VDA transactions can make a simplified return inappropriate.
Step-by-Step Crypto ITR Filing Workflow
Step 1: List every platform and wallet
Include:
- Indian exchanges.
- Foreign exchanges.
- Hardware wallets.
- Mobile wallets.
- Browser wallets.
- DeFi protocols.
- NFT marketplaces.
- P2P platforms.
Step 2: Download raw records
Do not rely only on an exchange’s dashboard number. Export complete CSV files before accounts are closed or history becomes unavailable.
Step 3: Identify disposals
Mark every:
- INR sale.
- Crypto swap.
- Stablecoin conversion.
- Purchase paid with crypto.
- NFT sale.
- LP-token redemption.
- Collateral liquidation.
- Gift or transfer to another owner.
Step 4: Separate internal wallet transfers
Match the withdrawal from one wallet to the deposit into another wallet you own.
Step 5: Assign INR values
For each disposal, preserve:
- Timestamp.
- Valuation source.
- INR rate.
- Token quantity.
Where no direct INR pair exists, document the conversion route used.
Step 6: Match acquisition costs
Identify the original purchase lot or other supportable acquisition value for every asset transferred.
Step 7: Calculate transaction-wise results
Determine positive income or loss for each disposal. Do not reduce positive amounts by prohibited losses.
Step 8: Reconcile TDS
Compare exchange reports with AIS, Form 26AS and relevant TDS certificates.
Step 9: Select the correct return
Choose ITR-2, ITR-3 or another applicable form based on the entire income profile.
Step 10: Complete Schedule VDA
Enter transaction-wise details using the applicable return utility.
Step 11: Review other schedules
Crypto rewards, gifts, foreign assets or business income may require additional schedules beyond Schedule VDA.
Step 12: Calculate tax credits and balance payable
Include:
- TDS.
- Advance tax.
- Self-assessment tax.
- Any valid refund adjustment.
Step 13: Pay the remaining tax
Use the correct Act, tax year or assessment year when generating the challan. For AY 2026–27 and prior years, the portal directs users to the Income-tax Act, 1961 payment route; Tax Year 2026–27 onward uses the Income-tax Act, 2025 route.
Step 14: File and verify
Complete e-verification within the required period and save:
- ITR acknowledgement.
- Filed return.
- Tax computation.
- Challans.
- Supporting reports.
When a Chartered Accountant Is Especially Important
Professional review is strongly advisable where the taxpayer has:
- More than one exchange.
- Foreign-exchange activity.
- DeFi transactions.
- P2P transfers.
- High transaction volume.
- Mining or validator income.
- Staking rewards.
- Airdrops.
- NFTs.
- Gifts or inheritance.
- Missing acquisition records.
- Exchange insolvency losses.
- Crypto salary or business receipts.
- Foreign assets.
- TDS discrepancies.
- An income-tax notice.
The cost of correcting an unsupported return can exceed the cost of obtaining advice before filing.
Crypto Tax Compliance Checklist for 2026
Before submitting the return, confirm that:
- Every exchange and wallet has been included.
- INR sales are reported.
- Crypto-to-crypto swaps are reported.
- Stablecoin disposals are reviewed.
- NFT transactions are reviewed.
- Internal wallet transfers are excluded from sales only where ownership is documented.
- Acquisition costs are supported.
- Prohibited losses have not reduced positive VDA income.
- TDS has been matched with government statements.
- The correct ITR form has been selected.
- Schedule VDA is transaction-wise.
- Reward and gift income has been considered separately.
- The correct Act and period were selected for payments.
- The return has been verified.
- Supporting records have been backed up.
Frequently Asked Questions
What is the crypto tax rate in India in 2026?
Positive income from transferring a VDA is generally taxed at 30%, plus applicable surcharge and 4% cess. The 30% rate applies to taxable VDA income, not automatically to the full sale amount.
Is the effective crypto tax rate 31.2%?
Where no surcharge applies, 30% tax plus 4% cess on that tax equals 31.2% of the taxable VDA income.
Is 1% TDS charged on crypto profit?
No. Crypto TDS is generally calculated on the consideration paid for the VDA transfer, not the seller’s profit.
Is buying Bitcoin with INR taxable?
Buying and continuing to hold Bitcoin does not ordinarily produce transfer income for the buyer. The purchase establishes an acquisition record for a later disposal.
Is selling Bitcoin taxable?
Yes. A sale for INR is generally a transfer. Positive income is calculated using the consideration and permitted acquisition cost.
Is converting Bitcoin to USDT taxable?
It can be. The Bitcoin is disposed of in exchange for another VDA, even though the investor does not receive INR.
Are crypto-to-crypto trades taxed?
Yes, a swap can create a taxable disposal of the asset surrendered.
Is moving crypto to a hardware wallet taxable?
A transfer between wallets under the same beneficial ownership should not ordinarily create disposal income. Keep evidence connecting both wallets to you.
Can a Bitcoin loss offset an Ether profit?
The VDA loss rules and Schedule VDA treatment do not permit a negative transfer amount to reduce positive VDA transfer income.
Can crypto losses be carried forward?
VDA transfer losses are not allowed to be carried forward under the special rule.
Can exchange fees be deducted?
Do not automatically deduct every fee. Only the legally permitted cost of acquisition is allowed under the special rule. The treatment of a fee embedded in acquisition cost can require professional review.
Are gas fees deductible?
Gas paid on a transfer should not automatically be deducted as an ordinary expense. Obtain advice where it forms part of a more complex acquisition or protocol transaction.
Are staking rewards taxable?
Staking rewards can create tax consequences at receipt and again on later transfer. The correct treatment depends on the legal and economic structure of the arrangement.
Are airdrops taxable?
Receipt of a VDA without consideration can fall within the gift and deemed-income provisions when the conditions are met. A later sale or swap can create a separate VDA transfer.
Is gifted cryptocurrency taxable?
The recipient may be taxed unless a gift exemption applies. Gifts from specified relatives, inheritance and certain other transfers can receive different treatment.
Is stolen crypto deductible?
Do not assume stolen or inaccessible crypto can be deducted. The VDA rules sharply restrict deductions and loss set-off.
Which ITR form is used for crypto?
ITR-2 may be appropriate for an individual or HUF without business or professional income. ITR-3 may be required where business or professional income is present. Review the taxpayer’s complete income profile.
What is Schedule VDA?
Schedule VDA is the dedicated return schedule for reporting transaction-wise income from Virtual Digital Asset transfers.
Can TDS be refunded?
TDS is a credit. Where valid TDS credits exceed the final tax liability, the return may result in a refund, subject to verification and processing.
Where can crypto TDS be checked?
For returns under the earlier framework, review Form 26AS, AIS, exchange TDS reports and TDS certificates. The 2026 transition introduces new forms for transactions falling under the Income-tax Act, 2025.
Does a foreign exchange deduct Indian crypto TDS?
Not necessarily. The absence of automatic deduction does not prove that no Indian obligation exists.
Does paying crypto tax make cryptocurrency legal tender?
No. Tax treatment and legal-tender status are separate. The RBI’s e₹ is legal tender; a privately issued cryptocurrency is not the same as the digital rupee.
Has crypto tax been removed in 2026?
No. Current Income Tax Department guidance continues to describe a 30% rate on VDA transfer income, plus surcharge and cess, and a 1% TDS framework.
Final Takeaway
Crypto tax in India is not limited to a headline 30% rate. Correct filing requires identifying every taxable transfer, calculating each transaction in INR, separating positive income from non-adjustable losses, reconciling 1% TDS and entering the required details in Schedule VDA.
The most common problems arise when taxpayers:
- Report only bank withdrawals.
- Ignore crypto swaps and stablecoins.
- Treat TDS as the final tax.
- Net all annual gains and losses.
- Lose their acquisition records.
- Assume an automated exchange report is complete.
- Use an outdated TDS form after the April 2026 transition.
A defensible return should allow every reported number to be traced back to an exchange order, bank record, wallet transaction, valuation source or tax statement. Where records are incomplete or the activity involves DeFi, gifts, mining, foreign exchanges or a large number of transactions, professional review is the safer approach.
Official References
- Income Tax Department guidance on taxation of Virtual Digital Assets.
- Section 115BBH and its restrictions on deductions and losses.
- Income Tax Department guidance on Schedule VDA.
- Income Tax Department guidance on 1% TDS for VDA transfers.
- Income-tax Act, 2025 TDS provision for VDA consideration.
- Form 141 guidance for transactions from Tax Year 2026–27.
- AIS and Form 26AS guidance.
- Crypto-asset reporting requirement effective from 1 April 2026.