Crypto Tax in India Explained: 30% Rule, 1% TDS & How to File in 2026

Paying tax on your crypto profits is not the fun part of investing — but ignoring it is far more expensive. India's crypto tax rules are among the strictest in the world, and the tax department has clear visibility into your trades through exchange reporting. The good news: the rules themselves are simple once someone explains them in plain language. This guide does exactly that.

> Educational content only. This is not financial advice or tax advice. Crypto tax rules in India are strict — consider consulting a qualified tax professional (CA) for your specific situation.

*Tax note: the 30% rate and 1% TDS described here were current as of September 2026. Tax rules can change — verify the latest rules before filing.*

The Short Version: Two Things That Hit Your Wallet

India's crypto tax has two main moving parts, both introduced in 2022 and still in force:

1. 30% tax on profits — every time you sell, swap, or spend crypto at a profit, you owe 30% tax on the gain, plus a 4% health and education cess (and surcharge if your income is very high).
2. 1% TDS on transfers — every time you sell or transfer crypto, 1% is deducted at source before you receive your money. It's not an extra tax — it's adjusted against what you owe.

Let's break down each one.

The 30% Rule: How Crypto Profits Are Taxed

What exactly is taxed?

Under Section 115BBH of the Income Tax Act, profits from transferring "virtual digital assets" (VDAs — crypto, NFTs, and similar tokens) are taxed at a flat 30%, regardless of your income slab. It doesn't matter whether you held the crypto for a day or five years — the rate is the same.

"Transfer" is broader than you might think. All of these are taxable events in India:

• Selling crypto for INR and withdrawing to your bank
• Selling crypto on an exchange, even if you leave the INR in your exchange wallet
• Swapping one crypto for another (e.g., trading Bitcoin for Ethereum is a taxable transfer of the Bitcoin)
• Paying for goods or services with crypto
• Receiving crypto as income or gifts above the exemption limit

The only thing that's NOT taxed is simply holding. If you bought Bitcoin and it's sitting in your wallet untouched, you owe nothing until you transfer it.

What you CAN'T claim (this is the painful part)

The 30% tax comes with harsh restrictions that beginners often miss:

• No deductions except the purchase cost. You can subtract what you originally paid for the crypto, but nothing else — no exchange fees, no gas fees, no internet costs, no "research" expenses.
• No set-off of losses. If you made ₹50,000 on Bitcoin but lost ₹40,000 on an altcoin, you cannot net them out. You pay 30% on the ₹50,000 gain. The ₹40,000 loss just disappears for tax purposes.
• No carrying losses forward. Unlike stocks, crypto losses can't be carried to next year either.

A worked example

Let's make this concrete. Imagine you bought 0.1 Bitcoin for ₹5,00,000 in January and sold it for ₹7,00,000 in June:

Item	Amount
Sale price	₹7,00,000
Purchase cost	₹5,00,000
Taxable gain	₹2,00,000
Tax at 30%	₹60,000
Cess at 4% of tax	₹2,400
Total tax due	₹62,400

That's the real cost of the profit — nearly a third. Frequent traders feel this the most: every profitable trade triggers it, and losses can't soften the blow.

The 1% TDS: The Deduction You See on Every Sale

What is TDS in the crypto context?

TDS (Tax Deducted at Source) means the buyer — usually your exchange — deducts 1% from your sale amount before paying you, and deposits it with the tax department against your PAN. It applies under Section 194S of the Income Tax Act.

Here's what a sale looks like with TDS:

Item	Amount
You sell crypto worth	₹1,00,000
1% TDS deducted by exchange	₹1,000
You receive	₹99,000

### Is TDS an extra cost?

No — and this is the part people misunderstand. TDS is an advance payment of tax, not an additional tax. The ₹1,000 deducted sits in your tax account and is credited when you file your return. If your total crypto tax for the year is ₹62,400 and ₹5,000 of TDS was already deducted across your trades, you only pay the remaining ₹57,400 when filing.

However, there's a catch: if your total crypto tax liability for the year is lower than the TDS deducted, you claim the excess as a refund — which means your money is locked with the government until the refund is processed. For active traders doing many transactions, TDS can quietly eat into their available trading capital.

Thresholds: when does TDS apply?

TDS applies above certain annual transaction values to protect very small traders from paperwork burden. In practice, Indian exchanges like CoinDCX, WazirX, and ZebPay deduct TDS automatically on qualifying transfers, so you rarely calculate it yourself.

One more detail: TDS also applies to crypto-to-crypto swaps. The exchange handles the mechanics, but the obligation exists even in peer-to-peer (P2P) deals — where the buyer is responsible for deducting.

Gifts and Airdrops: The Hidden Tax Traps

Two situations catch beginners off guard:

Crypto gifts. If someone gifts you crypto worth more than ₹50,000 in a year, it's taxable in your hands at 30% (plus cess) under gift tax rules — not at the time your friend bought it, but at its market value when you receive it. Gifts from close relatives (as defined by the tax law) are exempt.

Airdrops and staking rewards. Free tokens from airdrops, and rewards from staking or mining, are taxed as income when received — and taxed again at 30% when later sold. That's the law as it stands.

How to File: The Practical Steps

Step 1: Get your transaction records

Your Indian exchange provides a tax report or transaction history. Download it. If you traded on multiple exchanges or used DeFi wallets, consolidate everything — the tax department expects you to report your full picture. Several crypto tax calculation tools popular in India can import exchange data and compute your gains automatically.

Step 2: Calculate gains per transaction

For each transfer, note the sale value and the purchase cost of the specific crypto sold. Since you can't set off losses, calculate each profitable trade separately.

Step 3: Report in your ITR

Crypto income is reported under Schedule VDA in your income tax return (ITR-2 or ITR-3, depending on your situation). You don't need to report every single trade line-by-line in the form itself, but you must keep detailed records in case of scrutiny. Report:

• Total sale consideration
• Total cost of acquisition
• Resulting gains (taxed at 30% + cess)

Step 4: Pay and claim TDS credit

Check Form 26AS / the Annual Information Statement (AIS) to see the TDS already deducted against your PAN. Subtract it from your total tax due, pay the balance as advance/self-assessment tax, and file.

Step 5: Keep records for years

Maintain your transaction history, exchange statements, wallet addresses, and calculation workings for at least 6–8 years. The tax department can ask for them during assessment.

Common Mistakes Indian Crypto Beginners Make

1. "I didn't withdraw to my bank, so no tax." Wrong — swaps and exchange-internal sales are taxable.
2. "I'll offset my crypto loss against my salary." Not allowed. Crypto losses die with the financial year.
3. "TDS is the tax, I'm done." TDS is only 1% — you still owe the remaining ~29% on profits when you file.
4. "P2P trades are invisible." The buyer must deduct TDS in P2P deals too, and large UPI/bank transfers leave trails.
5. "I'll figure it out at filing time." Without records of every trade's purchase cost, calculating gains accurately becomes nearly impossible.

What About the Future?

India's crypto tax framework is widely considered punitive, and the industry has repeatedly asked for relief. Whether change comes is uncertain. What IS certain: enforcement is increasing — exchanges report transaction data to the tax department, and the AIS now reflects crypto activity for many taxpayers.

The practical takeaway for beginners: factor the 30% tax into every decision. A trade that looks profitable before tax can look very different after. Keep records from day one — it's far easier than reconstructing a year's trades in March.

*Tax note: crypto tax rules can change — the 30% rate and 1% TDS described here were current as of September 2026. Verify the latest rules before filing.*

Next Steps

• Download your transaction history from every exchange you've used — start the habit now, not in March.
• If your trades are more than a handful, try a crypto tax calculator built for Indian rules before filing season.
• When in doubt about gifts, airdrops, or large gains, a one-time consultation with a CA who understands crypto is money well spent.
• Read our guide on how crypto exchanges make money to understand the fees eating into your returns alongside tax.

*This article is for educational purposes only and is not tax or financial advice. Tax laws are complex and change over time — consult a qualified professional for advice specific to your situation.*

Keep Learning

If you found this guide useful, these related guides will help you go deeper:

• How to Keep Crypto Tax Records for Filing in India
• KYC on Crypto Exchanges: Why India Requires Verification
• RBI vs Crypto: The Complete History of Regulation in India