Crypto Tax in India: How Virtual Digital Assets Are Taxed (30% + 1% TDS)

By the MyTaxLocker Team · Updated 13 June 2026

If you bought, sold, or received cryptocurrency in India, the tax rules are stricter and simpler than for almost any other kind of income. There are no slabs, no holding-period benefit, and very little you can deduct. This guide explains how virtual digital assets are taxed, the 1 percent TDS that trips up most traders, why crypto losses are treated so harshly, and which income tax return form you actually need.

What counts as a virtual digital asset?

Indian tax law uses the term virtual digital asset, or VDA. It covers cryptocurrencies such as Bitcoin and Ethereum, as well as non-fungible tokens (NFTs) and similar tokens. If you hold or trade these, the VDA rules apply to you, whether you are a salaried employee dabbling on the side, a full-time trader, or someone who simply received crypto as a gift or payment.

The flat 30 percent tax

Gains from transferring a virtual digital asset are taxed at a flat rate of 30 percent, plus any applicable surcharge and the 4 percent health and education cess. This rate is fixed under a special provision of the Income Tax Act and does not change with your income level.

Two consequences follow, and both surprise people:

• There is no distinction between short-term and long-term. Whether you held the asset for two days or two years, the gain is taxed at the same 30 percent.
• Your income tax slab does not matter. Even if the rest of your income falls in a low slab or is fully covered by the Section 87A rebate, the crypto gain is still taxed at 30 percent. The basic exemption limit and the 87A rebate do not apply to this special-rate income.

Only the cost of acquisition is deductible

When you compute a crypto gain, the only amount you can subtract from your sale value is the cost of acquisition — what you originally paid to buy the asset. Nothing else is allowed. You cannot deduct trading fees, transfer charges, mining or infrastructure costs, interest, or any other expense. This is far narrower than the treatment of shares or property, where related costs are often allowed.

The harsh part: losses cannot be set off

This is the rule that catches active traders. A loss from one virtual digital asset cannot be set off against the gain from another virtual digital asset, let alone against your salary, business income, or any other head. And a VDA loss cannot be carried forward to a future year.

In plain terms, each profitable trade is taxed on its own, while losing trades give you no relief at all. If you made a one-lakh gain on one coin and a one-lakh loss on another in the same year, you are still taxed on the full one-lakh gain. Anyone trading multiple coins needs to understand this before assuming their net position is what gets taxed — it is not.

The 1 percent TDS that everyone forgets

Separately from the 30 percent tax, a 1 percent tax is deducted at source (TDS) when you transfer a virtual digital asset, once your transactions cross a small annual threshold — fifty thousand rupees for most individuals, and ten thousand rupees in other cases. On Indian exchanges, the exchange usually deducts this 1 percent automatically on each sale and deposits it against your PAN.

That TDS is not an extra tax; it is a prepayment. It shows up in your Form 26AS and AIS, and you claim credit for it when you prepare your return — exactly like the TDS on your salary. If your total crypto tax for the year is less than the TDS already deducted, the difference comes back to you as a refund. The mistake to avoid is ignoring it: that 1 percent is your money, and you only recover it by reporting your crypto activity and claiming the credit.

Crypto received as a gift

If you receive a virtual digital asset as a gift, its value can be taxable in your hands as income, subject to the usual gift rules. Crypto given by an employer or a client as payment is treated as income, too. Keep a record of the value on the date you received it.

Which ITR form do you need?

This is the practical catch for crypto holders. Because crypto gains are reported in a dedicated schedule for virtual digital assets, you cannot use the simplest return forms. You will generally need ITR-2 if you hold crypto as an investor, or ITR-3 if your crypto activity is treated as a business. The simple ITR-1 (Sahaj) and ITR-4 (Sugam) forms do not have a place to report VDA income. Hence, a salaried person who would otherwise file ITR-1 must move up to ITR-2 the moment they have crypto gains. Our guide on ITR-1 versus ITR-4 explains where the simple forms stop.

Keep good records

Because the rules are unforgiving, records matter. For every transaction, note the date, amount, acquisition cost, sale value, and TDS deducted. Exchange statements, your Form 26AS, and your AIS together give you most of this, but reconciling them before you file saves a lot of trouble.

Where MyTaxLocker fits

A quick, honest note on scope. MyTaxLocker is built for salaried taxpayers and small professionals preparing ITR-1 and ITR-4 — it reads your Form 16, compares the Old and New regime, and produces a ready-to-upload return for the official portal. Crypto gains, however, belong in ITR-2 or ITR-3, which are outside that scope. So if you have both a salary and crypto gains, MyTaxLocker can help you understand and prepare the salary side, but the crypto portion needs the appropriate higher form on the official e-filing portal. We would rather tell you that plainly than pretend otherwise.

The bottom line

Crypto in India is taxed at a flat 30 percent on gains, with only the purchase cost deductible, a 1 percent TDS on transfers that you claim back at filing, and no relief for losses. The slab rates and the 87A rebate do not apply, and the income goes in ITR-2 or ITR-3, not the simple forms. Know those five facts, and you will not be caught out. The VDA rules can change in future Budgets, so confirm the current position on the official portal before you file.