Crypto taxation in India underwent a fundamental shift with the introduction of Section 115BBH by the Finance Act 2022 — bringing every transfer of a Virtual Digital Asset (VDA) under a flat 30% tax rate, plus surcharge and 4% cess. From Bitcoin and Ethereum to NFTs, governance tokens, stablecoins, DeFi yields, and play-to-earn rewards — anything notified as a VDA under Section 2(47A) is now subject to a uniform tax framework that disallows any deduction except the cost of acquisition, prohibits set-off of losses against other income, and denies carry-forward of crypto losses to future years. Layered on top is Section 194S — a 1% Tax Deducted at Source (TDS) on the sale consideration of every crypto transaction, deducted by the buyer or the Indian exchange, that creates a permanent transactional trail in the taxpayer's Form 26AS and Annual Information Statement (AIS).
For Indian crypto investors, traders, miners, and businesses receiving payment in crypto, compliance is no longer optional — the Income Tax Department now receives transaction-level data from Indian crypto exchanges (CoinDCX, WazirX, ZebPay, Bitbns, Mudrex), the Financial Intelligence Unit (FIU-IND) registers and monitors Virtual Asset Service Providers (VASPs) under PMLA 2002, and AIS pre-fills crypto transactions directly into the ITR for matching with Schedule VDA. Mismatches trigger Section 143(1) intimations, defective return notices under Section 139(9), and in egregious cases, scrutiny under Section 143(2) or reassessment under Section 148. Our crypto consulting services help investors, full-time traders, miners, NFT creators, Web3 founders, and DAOs navigate this evolving framework — from accurate VDA tax computation, Schedule VDA preparation, and 1% TDS reconciliation to ITR filing, P2P transaction reporting, foreign exchange disclosure under Schedule FA, and PMLA / FEMA compliance for high-value crypto holdings.
30%
Flat Tax on VDA – Sec 115BBH
1%
TDS on Crypto – Sec 194S
Sec 2(47A)
VDA Definition
Schedule VDA
Mandatory ITR Disclosure
Provisions We Work Under
Sec 115BBH – 30% VDA Tax
Sec 194S – 1% TDS
Sec 2(47A) – VDA Definition
Sec 56(2)(x) – Gift of VDA
Schedule VDA – ITR
Schedule FA – Foreign Wallet
PMLA 2002 – VASP
FEMA – Foreign Exchange
CGST Act – GST on VDA
FAQs on Crypto Tax in India
How is crypto / Bitcoin taxed in India under Section 115BBH?
Under Section 115BBH of the Income-tax Act, 1961, income from the transfer of any Virtual Digital Asset (VDA) — Bitcoin, Ethereum, all altcoins, NFTs, governance tokens, stablecoins, and any other digital asset notified under Section 2(47A) — is taxed at a flat rate of 30%, plus applicable surcharge and 4% health and education cess. Effective rate including surcharge can reach 39% for high-income taxpayers. Key features: (a) No deduction is allowed except cost of acquisition — exchange fees, gas fees, transaction costs, advisory fees, infrastructure costs are not deductible (except where they form part of the acquisition cost in a specific transaction); (b) No basic exemption — even ₹1 of net gain is taxed at 30%; the slab structure does not apply; (c) No set-off of loss — loss from transfer of one VDA cannot be set off against gain from another VDA, nor against any other head of income (salary, business, capital gains, other sources); (d) No carry-forward — VDA losses are completely trapped in the year and lapse permanently; (e) Per-transaction tax — tax is computed transaction by transaction in Schedule VDA, not on a netted basis. Section 115BBH applies regardless of holding period — there is no concept of long-term or short-term in crypto taxation. Whether a coin is held for 1 day or 5 years, transfer attracts 30%. The framework is uniform across investors, traders, and miners — the only difference is the additional layer of tax at the receipt stage for miners / stakers (taxed as business / other income at FMV on receipt) before the 30% transfer tax kicks in on subsequent sale.
What is 1% TDS on crypto under Section 194S and how does it work?
Section 194S mandates the deduction of 1% TDS on the consideration paid for the transfer of any VDA. The deductor is generally the buyer — the person paying for the VDA — though in practice, when both parties trade through an Indian crypto exchange, the exchange acts as the deductor and remits TDS to the government. Thresholds: (a) ₹50,000 per FY for "specified persons" — individuals / HUFs whose business turnover does not exceed ₹1 crore (₹50 lakh for professionals) and salaried persons; (b) ₹10,000 per FY for all other taxpayers (companies, firms, large traders). Below the threshold, no TDS is required; above the threshold, 1% applies on every transfer. Indian exchange transactions — the exchange (CoinDCX, WazirX, ZebPay) deducts 1% from the sale proceeds, deposits it under TAN, and reports it in Form 26AS / AIS of the seller; the seller claims credit in ITR. P2P and foreign exchange transactions — when the buyer is an Indian resident and the platform does not deduct (e.g., P2P trade on Binance, OTC purchase from a friend), the buyer must self-deposit 1% TDS within the prescribed timeline by filing Form 26QE on the income-tax portal — failure attracts interest under Sec 201(1A) at 1% / 1.5% per month, penalty under Sec 271C, and disallowance. Crypto-to-crypto trades — TDS applies to both legs (each is a separate transfer); in practice, exchanges deduct on the gross consideration. The 1% TDS is credited to the seller and adjusted against the seller's final tax liability under Sec 115BBH (30%) — refund arises if 1% TDS exceeds final tax.
Can I set off crypto losses against gains from stocks, salary, or other income?
No — Section 115BBH is one of the strictest loss-treatment provisions in Indian tax law. The Act categorically prohibits three types of set-off: (a) Inter-VDA set-off — loss from one VDA (say Ethereum) cannot be set off against gain from another VDA (say Bitcoin) within the same year; each VDA's gain is taxed at 30% on a standalone basis, and losses are computed and held separately; (b) Inter-head set-off — VDA loss cannot be set off against any other head of income — not against salary, business income, capital gains on stocks / property, rental income, or interest; (c) Carry-forward — VDA losses cannot be carried forward to subsequent years; the loss simply lapses at the end of the financial year. This is in stark contrast to the treatment of stock market losses — equity LTCG / STCG losses can be set off (within capital gains head) and carried forward for 8 years. Practical consequences: A trader with ₹10 lakh gain on Bitcoin and ₹8 lakh loss on Ethereum pays 30% tax on the full ₹10 lakh (= ₹3 lakh + cess) — the ₹8 lakh Ethereum loss is wasted. Tax planning is largely limited to: (i) tax-loss "use" timing — though no set-off is allowed, recognising losses early to avoid AIS mismatch is still important; (ii) cost basis optimisation — choosing FIFO vs specific-identification to control which lots are deemed sold; (iii) crypto / fiat conversion timing — controlling the tax year of recognition; (iv) classification — for businesses / startups, characterising crypto as inventory (treasury operations) vs investment to argue against Sec 115BBH application is a developing area requiring professional advice. The hard restrictions are why crypto trading in India is structurally tax-inefficient compared to other asset classes, and why our crypto consulting focuses on minimising taxable events rather than optimising via loss harvesting.
How are mining, staking, airdrops, and DeFi yields taxed in India?
Mining, staking, airdrops, and DeFi yields trigger a two-stage tax framework in India: Stage 1 – Receipt / Acquisition: When the taxpayer receives crypto via mining, staking, liquidity provision, airdrop, or play-to-earn rewards, the Fair Market Value (FMV) in INR on the date of receipt is treated as income — characterised as: (a) Business income if the activity is systematic, profit-motivated, with infrastructure (mining rigs, validator nodes) — taxed at slab rates with deduction of business expenses (electricity, hardware depreciation, hosting fees); (b) Income from Other Sources if the activity is sporadic / passive (e.g., a one-off airdrop received without effort) — taxed at slab rates without business deduction benefit. Stage 2 – Transfer / Sale: When the same crypto is later sold or transferred, Section 115BBH applies — 30% tax on the difference between sale value and the FMV at receipt (which becomes the cost basis). Specific cases: (a) Mining — proof-of-work mining is generally business income at receipt; subsequent sale is 30% VDA tax. (b) Staking — staking rewards from PoS chains (Ethereum, Solana, Cardano) are characterised as business income (if active validator operation) or other income (if passive delegation); the rewarded coins' FMV at receipt is taxable. (c) Airdrops — Section 56(2)(x) treats receipt of VDA worth more than ₹50,000 as gift / income from other sources at FMV; subsequent sale at Sec 115BBH. (d) DeFi yield (Aave, Compound) — interest in stablecoin / token form taxed as other income at FMV; transfer at 30%. (e) Liquidity pool fees / LP rewards — characterisation depends on whether the LP arrangement amounts to a transfer / swap (which itself triggers 30%) — a complex area; specific advice is necessary. Our practice handles transaction-by-transaction characterisation, especially for active DeFi participants where every wrap, unwrap, swap, and yield event has potential tax consequences.
Do I need to disclose crypto held on Binance, Coinbase, or foreign wallets?
Yes — Resident and Ordinarily Resident (ROR) taxpayers must disclose crypto held on foreign exchanges and self-custody wallets linked to foreign jurisdictions in Schedule FA (Foreign Assets) of the ITR — alongside the regular Schedule VDA disclosure of transactions. Disclosure scope: (a) Foreign exchange holdings — Binance, Coinbase, Kraken, KuCoin, Bybit, OKX, etc., where the exchange is incorporated outside India; (b) Hardware wallets linked to foreign service providers (Ledger, Trezor) where applicable; (c) Self-custody wallets where the underlying chain / address has been associated with foreign exchange flows or foreign service providers — this is a developing interpretation; (d) NFT holdings on foreign marketplaces (OpenSea, Rarible). Schedule FA requires disclosure of: peak balance during the year (in INR), nature of asset, address / wallet identifier, and any income earned. Non-disclosure consequences: under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015, failure to disclose foreign assets — including crypto — attracts a flat penalty of ₹10 lakh per year of non-disclosure (regardless of the value of the asset), plus prosecution with imprisonment from 6 months to 7 years, and an additional 30% tax under the BMA framework. Even bona fide non-disclosure (forgot to report a small balance on a foreign exchange) attracts the ₹10 lakh penalty. Additional risks: (a) FEMA — bringing crypto from abroad or sending crypto abroad is subject to FEMA / Liberalised Remittance Scheme review; the Reserve Bank of India's interpretation of crypto under FEMA remains evolving; (b) FIU-IND / PMLA — large transactions on foreign exchanges by Indian users are increasingly visible to Indian authorities through PMLA cooperation channels, FATCA, and CRS reporting from cooperating jurisdictions. Our foreign-exchange crypto practice covers full Schedule FA preparation, FEMA review, voluntary disclosure via ITR-U where past non-disclosure exists, and BMA risk mitigation.
What happens if I don't report crypto in my ITR but it shows in AIS?
Indian crypto exchanges report user transactions to the Income Tax Department, which feeds directly into the Annual Information Statement (AIS) of the user — visible to both the user and the department. If the taxpayer fails to report crypto income in the ITR but the transactions appear in AIS, the system flags a mismatch and the taxpayer faces a cascading set of consequences: (a) Section 143(1) intimation — automated demand notice for the unreported income, computed at 30% with interest under Sec 234A / 234B / 234C; (b) Section 139(9) defective return notice — if the missing Schedule VDA is detected during processing; the taxpayer has 15 days to file a revised return; (c) Section 143(2) scrutiny — full scrutiny of the ITR with detailed examination of all financial transactions, bank accounts, and asset profile; (d) Section 148 reassessment — opening of completed assessments where the AO has reason to believe income has escaped assessment; for crypto, this can extend up to 10 years where escapement exceeds ₹50 lakh; (e) Section 270A penalty — 50% of tax payable for under-reporting; 200% for misreporting (concealment); (f) Section 271AAC — 10% additional tax on undisclosed crypto income covered by Sec 115BBH; (g) Prosecution — under Sec 276C for wilful tax evasion (rigorous imprisonment 3 months to 7 years plus fine). Voluntary correction options: (i) Revised return u/s 139(5) — if the original return was filed and the deadline (31 December of the AY) has not passed; (ii) Updated return u/s 139(8A) — within 24 months from end of AY with 25% / 50% additional tax — the safest route for past-year corrections; (iii) Vivad se Vishwas / settlement schemes if available. Our practice handles AIS-mismatch defence end-to-end — diagnosis of the mismatch, return revision / ITR-U filing, response to intimations, scrutiny representation, and where necessary, appeal before CIT(A) and ITAT.
Is GST applicable on crypto trading or NFT sales in India?
GST applicability on crypto and NFTs is a complex and evolving area with no specific statutory clarification yet. Current interpretations: (a) Crypto-to-crypto / fiat-to-crypto trades on exchanges — GST has been levied on the service component (exchange brokerage fee) at 18% — this is straightforward and exchanges include 18% GST in their fee invoices; (b) Crypto as a "good" — there is ongoing debate on whether VDAs themselves are "goods" under CGST Act for GST levy on the principal value of the trade (vs only the brokerage fee) — investigations under Sec 67 / 70 of CGST have been initiated against several exchanges; the matter remains unresolved at policy level; (c) NFT sales — for NFT creators selling on Indian platforms, GST has been levied at 18% on the consideration received — characterised as supply of services (digital art / collectibles) — though the position varies based on the nature of the underlying right transferred (utility token vs digital artwork vs ownership certificate); (d) Web3 services / crypto SaaS — companies providing services in the Web3 stack (crypto wallets, smart contract auditing, analytics, blockchain SaaS) charge 18% GST on B2B / B2C supplies; export of services to foreign clients can qualify for zero-rated supply with LUT. Mining — GST treatment of mining rewards is unsettled: some interpretations argue mining is a self-supply (not a taxable supply); others argue it's a service to the network (potentially taxable). P2P trades are generally outside GST as they are between two end-users and not supplies in the course of business — but volume-trading P2P participants may attract GST liability. Our crypto-GST practice covers GST registration, return filing for crypto exchanges and Web3 startups, place-of-supply determination for cross-border crypto services, refund of input tax credit on infrastructure / SaaS costs, and representation in GST scrutiny / search proceedings.