A complete guide to cryptocurrency taxation in India for 2026 — the 30 percent tax rate, 1 percent TDS, ITR filing process, and how to calculate and report your crypto gains correctly.
India introduced a specific taxation framework for cryptocurrency and other Virtual Digital Assets (VDAs) starting April 2022. The rules are straightforward but strict, and the penalties for non-compliance are severe. Whether you trade Bitcoin, Ethereum, altcoins, NFTs or any other crypto asset, you need to understand exactly how your gains are taxed, how TDS works, and how to report crypto transactions in your Income Tax Return.
This guide covers the current crypto tax rules applicable for FY 2025-26 (assessment year 2026-27) and the ITR filing process.
The basic tax rules for crypto in India
### 30 percent flat tax on gains
All gains from the transfer (sale, exchange, swap or spending) of Virtual Digital Assets are taxed at a flat rate of 30 percent, regardless of your income level or holding period. There is no distinction between short-term and long-term gains for crypto — the rate is 30 percent whether you hold for one day or five years.
A 4 percent health and education cess is applied on top of the tax, making the effective rate 31.2 percent.
This rate applies to:
- Selling crypto for INR or any fiat currency - Swapping one crypto for another (e.g., Bitcoin to Ethereum) - Spending crypto to buy goods or services - Selling or transferring NFTs - Any other transfer of a Virtual Digital Asset
### No deduction for expenses except cost of acquisition
When calculating your taxable gain, the only deduction allowed is the cost of acquisition — the price at which you bought the crypto. No other expenses can be deducted, including:
- Trading fees and commissions - Gas fees - Internet costs - Platform subscription charges - Any other incidental expense
Gain = Sale price - Cost of acquisition (purchase price only)
### No set-off of losses
Crypto losses cannot be set off against any other income — not even against gains from other crypto assets. If you make a Rs 5 lakh profit on Bitcoin and a Rs 3 lakh loss on an altcoin, you pay 30 percent tax on the full Rs 5 lakh. The Rs 3 lakh loss provides zero tax benefit.
Additionally, crypto losses cannot be carried forward to future years.
This is one of the harshest aspects of India's crypto tax regime and makes it essential to track each transaction individually.
TDS on crypto transactions (Section 194S)
A 1 percent TDS (Tax Deducted at Source) is applicable on every crypto transaction above the threshold limit. The buyer or the exchange (on the buyer's behalf) deducts 1 percent of the transaction value and deposits it with the government.
### TDS thresholds
| Category | TDS threshold | |---|---| | Transactions through an exchange | Rs 50,000 per year (for specified persons: HUF/individuals with turnover > Rs 1 crore or professional income > Rs 50 lakh) | | Transactions through an exchange (others) | Rs 10,000 per year | | Person-to-person (P2P) transactions | Rs 10,000 per year |
Most exchanges automatically deduct TDS on every qualifying transaction. For P2P transactions, the buyer is responsible for deducting and depositing TDS using Form 26QE.
The TDS is not an additional tax — it is an advance collection that gets adjusted against your total tax liability when you file your ITR. If you have overpaid, you can claim a refund.
How to calculate crypto tax: examples
### Example 1: Simple buy and sell
You bought 0.1 Bitcoin at Rs 25,00,000 per Bitcoin (cost = Rs 2,50,000) and sold at Rs 30,00,000 per Bitcoin (sale price = Rs 3,00,000).
- Gain = Rs 3,00,000 - Rs 2,50,000 = Rs 50,000 - Tax at 30 percent = Rs 15,000 - Cess at 4 percent = Rs 600 - Total tax = Rs 15,600
### Example 2: Crypto-to-crypto swap
You swapped 1 Ethereum (purchased at Rs 1,50,000) for another crypto worth Rs 2,20,000 at the time of the swap.
- Gain = Rs 2,20,000 - Rs 1,50,000 = Rs 70,000 - Tax at 30 percent = Rs 21,000 - Cess at 4 percent = Rs 840 - Total tax = Rs 21,840
Note: The newly acquired crypto now has a cost of acquisition of Rs 2,20,000 for future transactions.
### Example 3: Loss scenario (no set-off)
You sold an altcoin at a loss of Rs 1,00,000 and Bitcoin at a profit of Rs 2,00,000.
- Tax on Bitcoin gain = 30 percent of Rs 2,00,000 = Rs 60,000 - The Rs 1,00,000 altcoin loss provides zero benefit — it cannot be deducted - Total tax (before cess) = Rs 60,000
How to file crypto tax in your ITR
### Step 1: Gather your transaction records
Download your complete transaction history from each exchange you used during the financial year. This should include buy price, sell price, quantity, date and fees for every transaction.
### Step 2: Calculate gains for each transaction
For each sell, swap or spending transaction, calculate: Sale price minus Cost of acquisition = Gain/Loss
Remember that you can only deduct the cost of acquisition. Trading fees and gas fees are not deductible.
### Step 3: Choose the right ITR form
Crypto income is reported under Schedule VDA in the ITR. If you are a salaried individual, use ITR-2 or ITR-3. ITR-1 cannot be used if you have crypto income.
### Step 4: Fill Schedule VDA
Schedule VDA requires the following details for each transaction:
- Date of transfer - Date of acquisition - Head under which income is to be charged (typically "Income from other sources" or "Capital gains" — the schedule handles this) - Cost of acquisition - Sale consideration (sale price) - Gain/loss
### Step 5: Report TDS credit
The TDS deducted by exchanges or by you on P2P transactions appears in your Form 26AS and Annual Information Statement (AIS). Verify that all TDS credits are accurately reflected. Claim the TDS as credit against your total tax liability.
### Step 6: Pay any remaining tax
If the TDS already deducted does not cover your full crypto tax liability, pay the balance as self-assessment tax using Challan 280 before filing the return. Use our income tax calculator to estimate your overall tax position.
Crypto received as gifts, airdrops or mining
### Gifts
Crypto received as a gift is taxable as "Income from Other Sources" at its fair market value on the date of receipt, if the total value of gifts received in the financial year exceeds Rs 50,000. The cost of acquisition for future sale is the fair market value on the date of receipt.
### Airdrops
Airdrops are treated similarly to gifts. The fair market value on the date of receipt is taxable as income. If you later sell the airdropped crypto, the gain is calculated using the value at which you were taxed as the cost of acquisition.
### Mining and staking rewards
Rewards received from mining or staking are likely taxable as income at the time of receipt. When you subsequently sell, the 30 percent tax applies on the gain over the cost of acquisition (the value at which the income was initially recognised). The tax treatment of staking rewards is still evolving, and consulting a tax professional is advisable.
Penalties for non-compliance
The consequences of not reporting crypto income are serious:
- Under-reporting of income: Penalty of 50 percent of the tax payable on the under-reported amount - Misreporting of income: Penalty of 200 percent of the tax payable - Late filing of ITR: Late fee of Rs 5,000 (Rs 1,000 if total income is below Rs 5 lakh) plus interest on unpaid tax - Non-deduction of TDS: Penalty equal to the TDS amount plus interest
Exchanges report your transaction data to the Income Tax Department, and the AIS now includes crypto transaction details. The department can and does cross-verify your reported income with exchange data.
Strategies for crypto tax planning in India
Given the strict rules (no loss set-off, no expense deduction, flat 30 percent rate), the planning options are limited but worth knowing:
Track every transaction meticulously. Use a crypto tax calculator or spreadsheet to record every buy, sell, swap and transfer. This ensures you do not overpay tax by miscalculating your cost of acquisition.
Use FIFO (First In, First Out) method consistently. When you have bought the same crypto at different prices over time, FIFO uses the cost of the earliest purchase for the earliest sale. This is the most commonly accepted method.
Time your exits. Since losses provide no tax benefit, avoid realising losses and gains in the same year if possible. If you must book a loss, be aware it provides zero tax offset.
Keep clear records of P2P transactions. If you buy or sell crypto through P2P platforms, ensure you deduct and deposit TDS using Form 26QE. The onus is entirely on you.
Consult a CA for complex situations. If you trade on international exchanges, participate in DeFi protocols, or receive income from crypto staking, mining or airdrops, the tax treatment can be ambiguous. A chartered accountant with crypto tax expertise can help you file correctly.
This article is for educational purposes and does not constitute financial advice.