Income from transferring crypto is taxed at a flat 30%, plus cess. Your slab does not matter. Nor does how long you held it. You may deduct only the cost of acquisition. You may not set a crypto loss off against anything. Not against other crypto gains. Not against salary. And you cannot carry it forward. A 1% tax is also deducted at source on the sale value, not on your profit. Those are the four rules that make crypto the harshest asset class in Indian tax law.
Where do these rules sit now?
They moved. The Income-tax Act, 2025 took effect on 1 April 2026. It renumbered everything (source: Press Information Bureau, 3 September 2025). The old section 115BBH and section 194S are gone as numbers. Search for them and you will find guidance written for a repealed Act.
The 30% charge is now section 194(1), Table serial number 4. The 1% deduction is section 393(1), Table serial number 8(vi). We read both in the Gazette text of the Act (egazette.gov.in) on 6 September 2026. Transactions before 1 April 2026 are still governed by the old Act, where the challan-cum-statement for VDA deductions was Form 26QE.
What counts as a virtual digital asset?
Section 2(111) is deliberately wide. It covers any code, number or token that represents value and can be traded electronically. The code may be generated cryptographically “or otherwise”. It names non-fungible tokens separately. Clause (d) then sweeps in “any crypto-asset being a digital representation of value that relies on a cryptographically secured distributed ledger”. That applies whether or not it fits the earlier clauses.
Indian and foreign currency are excluded. The Central Government may notify further inclusions or exclusions. Section 194(2)(n) closes the last gap: “transfer” applies to a VDA “whether capital asset or not”. So you cannot argue your way out by calling it stock in trade.
How much TDS is deducted, and when?
One percent of the consideration. Section 393(1), Table serial number 8(vi), sets the rate at 1% with the threshold limit stated as “Nil”. The threshold sits elsewhere, in section 393(4), Table serial number 12. There, no deduction is required below ₹50,000 in a tax year for an individual or HUF. That ₹50,000 applies only to those with no business income, or with turnover under ₹1 crore in business or ₹50 lakh in a profession in the previous tax year. For everybody else the limit is ₹10,000.
Crypto-to-crypto trades are not exempt. Note 6 to the table covers consideration paid wholly or partly in kind. The payer must ensure the tax has been paid before releasing it. Swapping one token for another is a taxable transfer with a deduction attached.
Remember what the 1% is charged on. It is the sale value, not the gain. Sell ₹10,00,000 of a token you bought for ₹9,90,000 and ₹10,000 is deducted against a ₹10,000 profit. Active traders routinely find TDS locking up more cash than they made. Check it in your annual information statement — our page on Form 16 and 26AS shows where.
Can I set off a crypto loss?
No, and the Act says it twice. Look at section 194(1), Table serial number 4. Condition (a) allows no deduction except cost of acquisition, and no set-off of loss. Condition (b) goes further. No loss from a VDA transfer may be set off against income “under any provision of this Act”. Such a loss “shall not be allowed to be carried forward to succeeding tax years”.
Read that literally. Lose ₹5,00,000 on one coin and make ₹5,00,000 on another in the same year, and you still owe 30% on ₹5,00,000. This is the single most expensive thing people get wrong. Compare it with capital gains tax on shares or property, where set-off and carry-forward are ordinary features.
Does the tax department already know?
Increasingly, yes. Section 509 obliges prescribed reporting entities to file statements of crypto-asset transactions with the income-tax authority. A defective statement must be corrected within 30 days of intimation. An entity that later spots an error has 10 days to report it.
The Act also treats crypto like any other hidden asset. Sections 294 and 295 cover search and block assessment. They list “money, bullion, jewellery, virtual digital asset or other valuable article” together. Section 195 then taxes unexplained income of the kind covered by sections 102 to 106 at 60%. No deduction, no set-off. Undisclosed crypto is not a 30% problem. It is a 60% problem.
Frequently asked questions
Is crypto legal in India?
Taxing something is not the same as regulating it. The Act defines and taxes virtual digital assets. It does not make them legal tender, and it gives you no consumer protection if an exchange fails. Treat the tax rules and the investor protection question as separate.
Do I pay tax if I only hold and never sell?
No. The charge is on income from the transfer. Holding is not a transfer. Selling, swapping, and spending are.
Is airdropped or mined crypto taxed?
Receiving is treated differently from selling. The treatment turns on how you acquired it and what your cost of acquisition is. Section 194 allows only cost of acquisition as a deduction. So a zero-cost receipt means the whole sale value is taxed at 30% later. We will not give a rule for the receipt event itself. It depends on facts a page cannot know. Ask a chartered accountant.
What if I traded on a foreign exchange?
The 30% charge follows you, not the platform. What changes is the paperwork. No Indian intermediary deducts the 1% for you. Nothing appears in your statement, and the compliance burden is entirely yours. Filing late is expensive. See revised and updated returns.
Does surcharge and cess apply on top of 30%?
Cess does. Our tax table, current as of 17 August 2026, puts health and education cess at 4% of the tax. Surcharge applies by income level. So 30% is the floor, not the total.
Sources
Section references are to the Income-tax Act, 2025. We read the Gazette of India text at egazette.gov.in on 6 September 2026. The commencement date is from the PIB explainer of 3 September 2025. Form 26QE under the repealed Act is confirmed on incometax.gov.in. Cess is from our own tax table.
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