Crypto Taxation in India: An Overview (2026)

As of January 2026, India has put in place one of the most structured and clearly defined tax regimes for Virtual Digital Assets (VDAs). The introduction of Schedule VDA in Income Tax Returns, expanded disclosure requirements, and strict Tax Deducted at Source (TDS) provisions indicate the government’s intent to bring crypto transactions firmly within the formal tax framework. As regulatory oversight increases, crypto investors and traders must remain updated with evolving compliance obligations to avoid penalties and scrutiny.

Is Crypto Taxed in India?

Yes, crypto is fully taxable in India. Any profits arising from the sale, exchange, or use of crypto assets are taxed at a flat rate of 30%, along with applicable surcharge and an additional 4% health and education cess. This makes crypto one of the highest-taxed asset classes in the country. These rules were formally introduced in the Union Budget 2022, when the Hon’ble Finance Minister, Mrs. Nirmala Sitharaman, officially recognized digital assets under the category of “Virtual Digital Assets” for the first time. This classification includes cryptocurrencies such as Bitcoin and Ethereum, as well as digital assets like Non-Fungible Tokens (NFTs). Since then, crypto taxation has been governed by a dedicated legal framework.

Legal Framework Governing Crypto Taxation

The taxation of crypto assets in India is governed by Section 115BBH of the Income Tax Act. Under this provision, crypto income is taxed at a flat rate without any distinction between short-term and long-term holdings. Unlike traditional capital assets, crypto does not enjoy indexation benefits or concessional tax rates for long-term gains. Additionally, while calculating taxable income, deductions are strictly limited to the cost of acquisition of the asset. Expenses such as transaction fees, platform charges, or network costs are not allowed as deductions.

Key Takeaways

1. TDS on Crypto Transactions

To strengthen compliance and ensure transaction-level transparency, the government introduced a 1% TDS on all transfers of Virtual Digital Assets, effective from July 1, 2022. This TDS applies to both individual and institutional crypto transactions and is deducted on the gross transaction value, regardless of whether the transaction results in a profit or loss. The Union Budget 2025 further emphasized stricter monitoring and reporting under this rule, especially in light of increasing crypto adoption across India.

2. Income Tax Return (ITR) Reporting Requirements

From the financial year 2025–26, crypto taxation in India has entered a more rigorous compliance phase. Mandatory reporting requirements now apply not only to individual taxpayers but also to crypto exchanges and other designated intermediaries. The introduction of Schedule VDA ensures that crypto transactions are reported in a standardized and transparent manner, allowing tax authorities to cross-verify disclosures with exchange-reported data and TDS filings.

3. G20 Perspective on Crypto Regulation

At the international level, discussions among G20 nations have highlighted that an outright ban on cryptocurrencies would be impractical and counterproductive. Instead, global policymakers are advocating for a phased and coordinated regulatory framework that aligns with international standards. The focus is on balancing oversight and risk management while still allowing room for technological innovation within the crypto ecosystem.

4. Crypto Taxation in the Interim Budget 2025

The Interim Budget 2025 did not introduce any changes to the existing crypto tax structure in India. The prevailing framework comprising a 30% tax on crypto profits and 1% TDS on transfers, continues to apply. However, the budget reinforced the government’s emphasis on transparency by introducing enhanced reporting obligations for crypto exchanges and related entities from FY 2025–26, aimed at improving compliance and streamlining tax administration.

5. July 2025 Crypto Tax Update: GST on Crypto Services

A significant development occurred in July 2025, when an additional 18% GST was made applicable to crypto trading and service fees across platforms. This GST applies to spot trading, futures, and copy trading services and is levied over and above the existing income tax and TDS obligations. As a result, crypto investors now face a higher effective tax burden, with GST charges appearing as a separate line item on transaction statements, impacting the margins of frequent traders.

6. August 2025: Major Crypto Enforcement Action

In August 2025, Indian tax authorities uncovered approximately $124 million in hidden crypto assets as part of a larger $3.3 billion enforcement crackdown during FY 2024–25. Investigations revealed ₹29,208 crore in hidden foreign assets, including ₹1,089 crore in undisclosed foreign crypto income and ₹630 crore in concealed domestic crypto holdings. Authorities also seized digital assets worth ₹2.7 crore and identified over 5,400 taxpayers who filed delayed income tax returns, highlighting the growing focus on crypto-related tax evasion.

7. September 2025: India’s Move Towards Global Crypto Reporting

In September 2025, India announced plans to adopt the OECD’s Crypto-Asset Reporting Framework (CARF) by April 2027. The Finance Ministry is expected to sign the Multilateral Competent Authority Agreement (MCAA), extending global data-sharing mechanisms already used for foreign bank accounts to digital assets. Once implemented, overseas crypto holdings will no longer remain opaque, and retroactive reporting may be possible. Tax experts have cautioned investors to ensure full compliance, particularly as the ITR filing deadline has been extended to September 15, providing additional time for accurate disclosure.

Crypto Tax Enforcement Is Getting Stricter

The Ministry of Finance has clarified that no revisions to the existing crypto tax structure are expected in the near term. The government has also ruled out the introduction of Bitcoin or crypto-based Exchange Traded Funds (ETFs) for now. While tax rates remain unchanged, enforcement mechanisms are becoming increasingly sophisticated, signalling a strong compliance-first approach.

According to data shared by KoinX, the government has already collected ₹269 crore in crypto-related taxes during FY 2022–23, followed by ₹437 crore in FY 2023–24. These figures highlight both rising adoption and tighter tax monitoring within the digital asset ecosystem.

To strengthen oversight, tax authorities are actively using AI-driven systems such as Project Insight and the Non-Filer Monitoring System (NMS). These platforms automatically match the 1% TDS data filed by crypto exchanges with the income disclosed by taxpayers in their Income Tax Returns (ITRs), enabling faster identification of mismatches and non-compliance.

What Is a Crypto Tax “NUDGE”?

When there is a mismatch between the TDS reported by crypto exchanges and the income declared by an investor in their ITR, the Income Tax Department may issue a “NUDGE”. This is a soft compliance communication intended to prompt taxpayers to voluntarily correct discrepancies.

However, where inconsistencies exceed ₹1 lakh, the matter may escalate beyond a nudge, potentially resulting in formal notices, scrutiny assessments, or audits. These nudges reflect the department’s shift toward data-driven and preventive enforcement rather than reactive action.

Enhanced Enforcement Measures on the Horizon

India’s tax administration is rapidly building institutional capacity to handle crypto-related cases. Tax officers are now undergoing specialized training in blockchain analytics, digital forensics, and crypto wallet tracking to better understand complex digital transactions.

To support this effort, the government has partnered with the National Forensic Science University (Goa) for advanced training in crypto investigations. Additionally, from April 1, 2026, digital evidence such as application logs, transaction metadata, and electronic records may be formally relied upon during tax proceedings. During income tax search and seizure operations, authorities are now also empowered to inspect and examine crypto wallets, reflecting a significant expansion of investigative scope.

Budget 2025: Mandatory Crypto Reporting Framework

The Union Budget 2025 introduced a structured framework for mandatory reporting of crypto transactions. From FY 2025–26 onwards, individuals and entities dealing in Virtual Digital Assets (VDAs) are required to disclose their crypto income under a newly designated provision—Section 158B, commonly referred to as Schedule VDA in the Income Tax Return.

The objective of this framework is to standardize crypto tax disclosures, improve transparency, and enable seamless cross-verification between taxpayer filings and reports submitted by crypto exchanges, brokers, and other intermediaries. Non-compliance or inaccurate reporting under this regime may attract penalties and further scrutiny.

Industry Perspective on India’s Crypto Tax Policy

From an industry standpoint, India’s current approach to crypto taxation has highlighted several structural challenges, particularly the unintended impact of the 1% TDS mechanism on Virtual Digital Asset (VDA) transactions.

While the 30% flat tax on crypto gains often receives primary attention, industry analysis suggests that the TDS framework has had a more disruptive influence on market behavior. The continuous deduction of tax at source on every transaction has reportedly reduced liquidity on domestic platforms and encouraged a significant number of Indian users to migrate to offshore exchanges. As a result, a substantial volume of crypto trading activity has moved outside the domestic tax net, leading to potential revenue leakage despite higher nominal tax rates.

Outlook: Global Alignment and the Compliance Imperative

Looking ahead, India’s proposed adoption of the OECD’s Crypto-Asset Reporting Framework (CARF) signals a strategic shift toward global coordination in crypto regulation. This framework aims to bring offshore wallets and exchange transactions under automatic information-sharing arrangements, reducing regulatory arbitrage and improving transparency.

Until a more balanced and globally aligned crypto tax regime is implemented, compliance remains a critical priority for Indian investors and traders. With increasing data sharing, enhanced reporting requirements, and advanced analytics used by tax authorities, unreported or under-reported crypto income may attract scrutiny in the future. Proactive disclosure, accurate reporting, and professional tax guidance are essential to ensure compliance and mitigate long-term risks.

Budget 2024: Crypto Tax Update

The Income Tax Return (ITR) forms for the Financial Year 2023–24 introduced a dedicated disclosure section titled Schedule – Virtual Digital Assets (VDA). This schedule mandates taxpayers to separately report income arising from cryptocurrencies and other digital assets.

The due date for filing the return for FY 2023–24 was 31 July 2024. However, taxpayers who missed the original deadline were allowed to file a belated return up to 31 December 2024, subject to applicable late fees and interest.

The introduction of Schedule VDA marked a significant step toward improving transparency and tracking of crypto-related income under India’s income tax framework.

Budget 2023 and the Legal Foundation of Crypto Taxation

India’s crypto taxation framework originates from the Union Budget 2022, which formally recognized crypto assets under the legal classification of “Virtual Digital Assets” (VDAs). These assets are not treated as legal tender or currency backed by the Reserve Bank of India, but as a distinct asset class for taxation purposes.

Section 115BBH of the Income-tax Act defines the transactions that trigger tax liability on VDAs. A taxable event occurs when a virtual digital asset is:

• Converted into Indian Rupees or any other fiat currency
• Exchanged for another virtual digital asset, including crypto-to-crypto or stablecoin trades
• Used as a mode of payment for goods or services

Income arising from any of the above transactions is subject to a flat tax rate of 30%, which aligns with the highest income tax slab in India.

In addition, transactions exceeding ₹10,000 attract a 1% Tax Deducted at Source (TDS) under the applicable provisions.

Understanding Virtual Digital Assets (VDAs)

Virtual Digital Assets refer to digital representations of value that exist electronically and do not have a physical form. This category primarily includes:

• Cryptocurrencies such as Bitcoin, Ethereum, and similar tokens
• Decentralized finance (DeFi) tokens
• Non-Fungible Tokens (NFTs)

The definition specifically excludes digital gold, Central Bank Digital Currency (CBDC), and other traditional electronic financial instruments. The legislative intent is to ensure focused taxation of crypto-related assets rather than all digital value systems.

Crypto Taxation in India: Key Rules Investors Must Know

·        Based on current regulations reaffirmed through Budget 2025, the following principles govern crypto taxation in India:

·        Income from the transfer of Virtual Digital Assets, including cryptocurrencies and NFTs, is taxed at a flat rate of 30%, irrespective of the holding period.

·        Only the cost of acquisition is allowed as a deduction while computing taxable income. No other expenses, such as transaction fees or platform charges, are permitted.

·        Losses arising from VDAs cannot be set off against any other income, nor can they be carried forward to future years.

·        Gifts of digital assets are taxable in the hands of the recipient, subject to applicable provisions under the Income-tax Act.

·        Losses from one virtual digital asset cannot be adjusted against gains from another.

·        A 1% TDS is applicable on the transfer of VDAs, as introduced in Budget 2022 and continued thereafter.

Mandatory Reporting from FY 2025–26 Onwards

Starting from Financial Year 2025–26, mandatory reporting requirements apply to both individual taxpayers and crypto exchanges. All crypto transactions must be disclosed under a dedicated schedule in the ITR, enabling better reconciliation with TDS data and third-party reports submitted by exchanges.

This move significantly enhances traceability and places greater responsibility on taxpayers to ensure accurate reporting of crypto income.

Higher TDS for Non-Filers: Section 206AB

Under Section 206AB of the Income-tax Act, 1961, higher TDS rates apply to certain non-compliant taxpayers. If an individual has not filed Income Tax Returns for the preceding two years and the TDS amount exceeds ₹50,000 in each of those years, the applicable TDS rate on crypto transactions increases to 5% instead of 1%.

TDS provisions apply even if a crypto transaction was initiated before 1 July 2022, provided the trade was executed on or after that date.

How Much Tax Do You Pay on Crypto in India?

In India, income from crypto transactions is subject to a two-layer tax structure. This includes a flat income tax on profits and a tax deducted at source (TDS) on each transaction. These provisions apply uniformly to all taxpayers dealing in Virtual Digital Assets (VDAs).

The 30% tax applies to net profits earned during the financial year, while the 1% TDS is deducted on the gross transaction value and can be adjusted while filing the Income Tax Return (ITR).

What Is the 1% TDS on Crypto Transactions?

Under the Income Tax Act, a 1% TDS is applicable on every transfer of a Virtual Digital Asset, effective from 1 July 2022. The TDS is deducted on the total sale consideration, not on the profit component.

This deduction applies irrespective of whether the transaction results in a gain or a loss. Even loss-making transactions are subject to TDS. However, the amount deducted can be claimed as credit against the final tax liability at the time of ITR filing.

How Is the 30% Crypto Tax Calculated in India?

Income arising from the transfer of Virtual Digital Assets is taxed at a flat rate of 30%, without any distinction between short-term or long-term holding periods.

This tax rate applies uniformly:

• Regardless of whether the income is treated as investment income or business income
• Irrespective of the duration for which the asset was held

Only the cost of acquisition is allowed as a deduction. No other expenses, including transaction charges or platform fees, are permitted while computing taxable income.

Tax Implications When Selling Crypto in India

Any profit earned from selling or exchanging a Virtual Digital Asset is taxable in India.

Selling Crypto for Fiat Currency

• 30% tax applies on the profit earned from the transaction
• 1% TDS is deducted on the gross transaction value
• The deducted TDS can be claimed as credit while filing the ITR

Restrictions on Loss Set-Off for VDA Transactions

The Income-tax Act explicitly restricts the adjustment of losses arising from Virtual Digital Assets. Losses incurred from one VDA transaction cannot be set off against gains from another VDA, nor against any other head of income.

Each transaction is assessed independently for tax purposes, making accurate reporting essential.

Illustrative Examples

Example 1: Tax on Profit from a VDA Transfer

An individual acquires a Virtual Digital Asset for ₹1,00,000 and later transfers it for ₹1,50,000.

• Profit earned: ₹50,000
• Tax payable: 30% of ₹50,000 = ₹15,000 (plus surcharge and cess)

Tax liability arises only at the time of transfer. Mere holding of VDAs does not attract tax on unrealized gains.

Example 2: Gain and Loss in the Same Financial Year

During a financial year, the following transactions occur:

• Transaction 1: A VDA is acquired for ₹5 lakh and transferred for ₹6 lakh (profit of ₹1 lakh)
• Transaction 2: Another VDA is acquired for ₹2 lakh and transferred for ₹1.5 lakh (loss of ₹50,000)

The loss from Transaction 2 cannot be adjusted against the gain from Transaction 1

• Taxable income: ₹1,00,000
• Tax payable: 30% of ₹1,00,000 = ₹30,000 (plus surcharge and cess)

G20 Updates on Crypto Regulations

As part of its broader efforts to regulate Virtual Digital Assets (VDAs), India placed crypto regulation high on the agenda during its G20 presidency. The discussions focused on achieving global coordination rather than fragmented national approaches, recognising the cross-border nature of crypto transactions.

G20 member nations collectively worked on advancing the Crypto-Asset Reporting Framework (CARF) along with proposed amendments to the Common Reporting Standard (CRS). These frameworks aim to strengthen transparency and enable the automatic exchange of information related to digital asset transactions across jurisdictions. G20 leaders have called upon the Global Forum on Transparency and Exchange of Information for Tax Purposes to establish a coordinated and practical timeline for implementation by participating countries.

A key consensus emerging from these discussions was that crypto assets should not be treated as legal tender. Policymakers also acknowledged that an outright ban on crypto assets would be difficult to enforce and could be counterproductive. Instead, a structured regulatory framework with global alignment was considered a more effective approach to oversight and compliance.

The discussions further highlighted that crypto assets represent a new frontier in financial systems and economic organisation, with potential implications for monetary stability. As a result, there is growing emphasis on developing universal standards to govern digital assets while balancing innovation with regulatory safeguards.

In parallel, there have been domestic discussions around the strategic relevance of crypto assets within global financial systems. These debates reflect a broader international trend where countries are evaluating the role of digital assets in macro-finance, reserves, and long-term economic planning though no formal policy shift has been announced in this regard.

Conclusion

Crypto taxation and regulation in India have evolved into a well-defined compliance framework with strict reporting, disclosure, and enforcement mechanisms. Understanding applicable tax rates, TDS obligations, reporting under Schedule VDA, and penalties for non-compliance is essential for individuals and businesses dealing in Virtual Digital Assets.

With increased data sharing, global coordination through G20 initiatives, and the adoption of advanced monitoring tools, transparency has become central to crypto taxation in India. Staying informed, maintaining accurate records, and ensuring timely tax filings are critical to avoiding regulatory risks. A proactive compliance approach not only safeguards against penalties but also ensures long-term financial and legal clarity in an increasingly regulated digital asset ecosystem.