Crypto Tax in India 2026: Flat 30% VDA Tax, 1% TDS & ITR Rules

Profits from selling Bitcoin, Ethereum or any other crypto asset have been taxed under a special regime since 1 April 2022: a flat 30% rate plus 4% cess, almost no deductions, and a 1% TDS on every transfer above a small threshold. The rules continue into FY 2025-26 (AY 2026-27) and carry forward under the Income-tax Act, 2025. Here is how the regime works, what the 1% TDS means for your cash flow, and how to report every trade in your return.

At a glance: the VDA regime in 2026

What counts as a virtual digital asset

A virtual digital asset (VDA) is any information or code produced through cryptographic means and having value – this covers cryptocurrencies such as Bitcoin, Ethereum and USDT, as well as most NFTs. The definition is deliberately wide, so tokens, stablecoins and crypto rewards generally fall inside it. Equity shares, mutual funds and other regular securities are not VDAs and follow normal capital-gains rules.

One exception exists. NFTs transferred for a consideration below ₹10,000 were notified as outside the VDA definition in June 2022, subject to conditions, so low-value NFT transfers escape the regime. The exclusion does not cover high-value sales or bundles of low-value NFTs moved together as a scheme, so keep records of NFT sale values.

The flat 30% tax and what you can deduct

Income from transferring a VDA is taxed at a flat 30% on the gain, plus 4% health and education cess, taking the effective rate to 31.2%. Surcharge on such income is capped at 15%, so the rate holds at high income levels too. There is no long-term or short-term distinction for VDAs – the rate applies whether you held the asset for a week or three years.

Your only allowed deduction is the cost of acquisition of the asset. Platform trading fees, network or gas charges, wallet costs and advisory fees cannot be claimed. If you bought one coin across several purchases, add up every purchase cost carefully, because a proper cost ledger directly cuts the taxable gain.

Loss rules: the harshest part of the regime

A crypto loss cannot be set off against any other income – not salary, not business income, not even gains from another crypto trade. The loss also cannot be carried forward to future years, so it simply lapses. If you sold one coin at a gain and another at a loss in the same year, both are reported separately in Schedule VDA and the loss is disallowed rather than netted against the profit.

Gifts follow the same logic. When you transfer crypto as a gift, the recipient is taxed on its value at the flat 30% rate in their own hands, and you cannot claim a matching deduction or loss. Family gifting that softens tax on shares does not work for VDAs, so factor the tax before transferring coins within the family.

1% TDS under Section 194S

Every transfer of a VDA attracts 1% TDS once the total transfer value during the year crosses the threshold. For most taxpayers the threshold is ₹10,000; for specified persons – small individual and HUF taxpayers whose business or professional turnover stays below tax-audit limits – it is ₹50,000. The buyer deducts the TDS when paying you, and both exchange trades and peer-to-peer deals with direct bank transfers are covered. On exchanges, the platform or its payment partner typically deducts the 1% on the seller’s behalf, so the tax reaches the government either way.

TDS is not an extra tax – it is an advance credit against your final 30% liability, appearing against your PAN in Form 26AS (Form 168 from tax year 2026-27) and the AIS. Sell crypto worth ₹2,00,000 in a year and roughly ₹2,000 gets deducted across the trades, reducing your tax payable or adding to your refund. Furnish your PAN to every counterparty so the credit is reported correctly against you.

Reporting in Schedule VDA of your ITR

Disclosing VDA income is mandatory even if the gain is small or the trade ended in a loss. Schedule VDA asks for transfer-wise details arranged quarter-wise: date of transfer, sale consideration, cost of acquisition and the resulting gain or loss. Most investors report crypto in ITR-2 or ITR-3, and our ITR-forms guide covers the choice. The pre-filled figures from 26AS and AIS will show the 1% TDS, and mismatches between your Schedule VDA and the AIS are a common trigger for scrutiny – reconcile both before submitting.

Does the regime change from 1 April 2026?

The Income-tax Act, 2025, which replaces the 1961 Act from 1 April 2026, continues the VDA regime – the flat 30% rate, the no-set-off rule and the 1% TDS obligation all carry over, with sections renumbered. Keep earlier-year records ready, since the reporting format stays transfer-wise and quarter-wise under the AY 2027-28 utilities.

Common mistakes to avoid

• Netting off a loss on one coin against a gain on another – each transfer stands alone and losses lapse.
• Skipping P2P or small trades because no TDS appeared – the income is fully taxable and disclosure is mandatory.
• Treating a crypto gift as tax-free because family share gifts are – VDA gifts are taxed in the recipient’s hands.
• Claiming exchange fees and network charges as deductions – only cost of acquisition is allowed.

Key takeaways

• VDA gains are taxed at a flat 30% plus 4% cess (31.2% effective), with only cost of acquisition deductible, for FY 2025-26 and beyond.
• Losses cannot be set off against other income or other VDAs and cannot be carried forward; gifts are taxed in the recipient’s hands.
• 1% TDS under Section 194S applies above ₹10,000 of annual transfers (₹50,000 for specified persons) and shows up in 26AS/AIS.
• Schedule VDA reporting is mandatory for every transfer, quarter-wise, even at a loss.

Frequently asked questions

Do I pay 30% on the full sale value or only the profit?

Only the profit. Sale consideration minus cost of acquisition is the taxable gain, taxed at 30% plus 4% cess. The sale value itself is not taxed.

Is the 1% TDS an additional cost on top of the 30%?

No. It is an advance credit that appears in Form 26AS and the AIS. It adjusts against your final tax liability when you file the return.

I made an overall crypto loss this year. Can I use it later?

No. VDA losses can neither be set off against other income nor carried forward. Still report the loss in Schedule VDA so your record stays clean.

Are NFTs also taxed at 30%?

Yes, as VDAs. Only notified NFTs transferred below ₹10,000 fall outside the definition, and the exclusion does not cover bundled high-value transfers.

Does the 30% regime continue under the Income-tax Act, 2025?

Yes. From 1 April 2026 the new Act continues the flat 30% rate and the 1% TDS with renumbered sections. The substance of the regime is unchanged.

Disclaimer: Tax laws change frequently. Verify current rates and deadlines on the official portals (incometax.gov.in, gst.gov.in) or consult a qualified professional before acting.