How Crypto Gains Are Taxed in India

Crypto tax in India is unusually blunt compared to every other asset class: one flat rate, no favourable treatment for holding long-term, and no relief for losses. This guide covers exactly how it works, unchanged again in Budget 2026, plus the details around TDS, airdrops, gifting, and reporting that most explanations skip.

The core rule

The no-loss-offset rule, with an example

If you made Rs. 50,000 profit on Bitcoin and lost Rs. 30,000 on another token in the same year, you cannot net these against each other. You owe 30% tax on the full Rs. 50,000 gain — the Rs. 30,000 loss simply cannot be used, not even carried forward to a future year. This is a genuinely unusual rule; almost every other capital asset in Indian tax law allows some form of loss offsetting, and crypto's explicit exclusion from this is a deliberate policy choice, not an oversight.

This also means gains and losses must be calculated separately for each transaction, not netted at a portfolio level before applying tax. If you have ten profitable trades and five loss-making ones in a year, the tax department's view is that you owe 30% on the sum of the ten gains, full stop — the five losses simply don't factor into the calculation at all.

What counts as a taxable event

• Selling crypto for INR
• Swapping one crypto asset for another (yes, this counts, even without converting to INR at any point)
• Spending crypto to buy goods or services
• Receiving crypto as a reward, airdrop, or through staking/mining — taxed at your slab rate as income when received, then 30% on any further appreciation when eventually sold

The swap rule in particular surprises people — trading Bitcoin for Ethereum feels like "staying in crypto," but for tax purposes it's treated as selling the Bitcoin (a taxable event) and separately buying Ethereum (a new cost basis going forward).

This applies equally to trading crypto for a stablecoin, even though a stablecoin is designed to track a fiat currency's value — the swap into a stablecoin is still legally a disposal of the original asset, not a neutral "parking" move, and any gain up to that point is realised and taxable at that moment.

The 1% TDS rule, explained

Under Section 194S, a 1% TDS applies to crypto transfers above specified thresholds, deducted by the exchange (for transactions on Indian platforms) or by the buyer directly (in certain peer-to-peer situations). This TDS is not the final tax — it's an advance credit against your eventual 30% liability, similar to how salary TDS works, adjusted when you file your return.

In practice, this means every time you sell or swap crypto on an Indian exchange, you'll notice a small amount withheld immediately, separate from the 30% tax you'll actually owe on any profit when you file. The 1% is calculated on the full transaction value, not just the gain — meaning it applies even on transactions that end up being a loss, which is one more reason careful record-keeping matters, since that withheld amount is still a legitimate credit you should claim.

Airdrops, staking, and mining income

Crypto received without a direct purchase — an airdrop, a staking reward, or mining output — is taxed in two separate stages:

1. At receipt: the fair market value of the crypto at the time you receive it is taxed as income at your regular slab rate, typically under "income from other sources."
2. At eventual sale: when you later sell that crypto, any further appreciation from its value at receipt is taxed separately at the flat 30% rate — the value at receipt becomes your cost basis for this second calculation.

This two-stage treatment means airdropped or staked tokens can create a tax liability even before you've sold anything and realised actual cash — a genuine cash-flow consideration worth planning for if you're actively staking or farming airdrops, since the tax on receipt is due regardless of whether you've converted any of it to rupees.

Gifting and inheriting crypto

Gifting crypto to a family member is generally not taxable for the giver, but can be taxable income for the recipient if the value exceeds Rs. 50,000 in a year and doesn't qualify for the standard gift exemptions (like gifts from specified relatives, which are exempt regardless of amount). Inherited crypto generally isn't taxed at the point of inheritance, but the original cost of acquisition typically carries over to the person who inherited it, meaning the eventual sale is taxed based on the original owner's purchase price and date, not the value at the time of inheritance. This area has less settled practical guidance than straightforward buying and selling, so treat it with extra caution and confirm specifics before a large gift or inheritance-related transaction.

Reporting it correctly: Schedule VDA

All VDA (Virtual Digital Asset) transactions must be reported in Schedule VDA within ITR-2 or ITR-3, listing each transaction with its date of acquisition, date of transfer, sale consideration, cost of acquisition, and resulting gain. This isn't a summary field — it expects transaction-level detail, which is why exporting a full transaction history from every exchange or wallet you've used is worth doing well before filing season, not the week of the deadline.

The tax department increasingly cross-checks TDS data reported by exchanges against what's declared in your return — a mismatch above a certain threshold can trigger a scrutiny notice, so reconciling exchange statements with your filed return matters more here than in most other income categories, given how directly traceable exchange-reported data is.

Foreign exchanges and compliance

If you trade on foreign/international exchanges rather than Indian ones, the same 30% tax and reporting obligations still apply — the tax treatment is based on your residency and the nature of the asset, not which platform you used. What changes is that foreign exchanges typically don't deduct the 1% TDS the way Indian platforms do, so you're fully responsible for tracking and reporting those transactions yourself. Holdings on foreign platforms may also intersect with foreign asset reporting requirements under the Black Money Act, which carries separate and significantly more severe penalties for non-disclosure than a standard income tax issue — this is genuinely worth professional advice if it applies to you, rather than treating it as a minor detail.

The Black Money Act specifically targets undisclosed foreign assets and income, and its penalty structure is materially harsher than standard income tax non-compliance — including the possibility of penalties well in excess of the tax itself, and in serious cases, prosecution. A foreign crypto exchange account, even a modest one, can potentially fall under this reporting regime depending on the specifics, which is a different and more serious compliance question than simply "did I pay 30% on my gain." If you hold assets on any platform not based in India, this is worth a direct conversation with a chartered accountant rather than assuming standard VDA rules are the only thing that applies.

Good record-keeping habits go a long way here regardless of which platforms you use: export transaction history quarterly rather than waiting until filing season, keep screenshots or PDFs of statements from any exchange you stop using (platforms shutting down or restricting Indian access has happened before and will likely happen again), and maintain a simple running log of acquisition dates and costs for anything you're holding long-term. None of this is required by law in a specific format, but all of it makes an eventual scrutiny inquiry, if one arises, considerably less stressful to respond to.

What changed for 2026

The core 30% rate, 1% TDS, and no-loss-offset rules remain unchanged in Budget 2026, despite industry pressure for reform. What's new is a stricter penalty regime for reporting entities (exchanges and platforms) that fail to report VDA transaction statements correctly — this indirectly increases the pressure on individual compliance too, since exchange reporting is what gets cross-checked against your return. In practical terms, this makes it less likely that gaps between what an exchange reports and what you declare will go unnoticed, compared to earlier years.

A worked example across a full year

Say across a financial year you had these crypto transactions: bought Rs. 2,00,000 of Bitcoin, sold it later for Rs. 3,20,000 (a Rs. 1,20,000 gain); separately bought Rs. 1,00,000 of an altcoin that dropped to Rs. 60,000 before you sold it (a Rs. 40,000 loss); and received an airdrop worth Rs. 15,000 at the time of receipt, which you held without selling.

Total crypto-specific tax for the year: Rs. 37,440 on the Bitcoin gain alone, plus whatever slab-rate tax applies to the Rs. 15,000 airdrop income — the Rs. 40,000 altcoin loss provides no relief whatsoever against either of these. This example is exactly why the no-offset rule matters in practice, not just in theory: a portfolio that was net profitable by only Rs. 95,000 (Rs. 1,20,000 gain minus Rs. 40,000 loss, plus the airdrop) still owes tax calculated as if the loss never happened.

NFTs and DeFi income

NFTs (non-fungible tokens) fall under the same VDA classification and 30% tax treatment as cryptocurrencies — buying, selling, or trading an NFT triggers the same rules covered throughout this guide. Income from DeFi (decentralised finance) activities — lending crypto for interest, providing liquidity to a pool and earning fees, or yield farming — is generally treated similarly to staking rewards: taxed as income at your slab rate when received, with any further appreciation on the received tokens taxed at 30% on eventual sale. This area has less specific guidance than straightforward buy-and-sell trading, and the "right" classification can depend on the specific mechanics of the DeFi protocol involved — treat DeFi income with extra documentation and caution given the relative lack of settled precedent.

Common mistakes

• Not reporting swap transactions, assuming only INR conversions count — token-to-token swaps are taxable events too.
• Trying to net losses against gains anyway, which is disallowed and can trigger a mismatch with the department's own reconciliation systems.
• Ignoring TDS reconciliation — always check that the 1% TDS shown in your exchange statements matches what appears in Form 26AS.
• Forgetting airdrops and staking rewards are taxable on receipt, not just on eventual sale.
• Not keeping records from exchanges that later shut down or restricted Indian access — export your full transaction history periodically rather than assuming it'll always be available later.
• Treating foreign exchange trades as somehow outside Indian tax jurisdiction — residency, not platform location, determines your tax obligation.

The bottom line

Crypto taxation in India is deliberately unforgiving compared to almost every other asset class: a flat rate regardless of holding period, no loss offsetting under any circumstance, and increasingly close scrutiny between exchange-reported data and individual filings. The practical implication is that active crypto trading carries a real, calculable tax drag that doesn't behave the way equity or mutual fund taxation does — a string of profitable and unprofitable trades doesn't net out the way it would with stocks. Anyone trading meaningfully in crypto should track every transaction individually, reconcile TDS against Form 26AS regularly rather than just at filing time, and treat Schedule VDA as a genuine transaction-level reporting requirement, not an afterthought.

Frequently asked questions

CA Pankaj Chhabra

Chartered Accountant · Wealth Management & Taxation

CA Tripti Saini

Chartered Accountant · Taxation & Finance Operations

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