Crypto Tax in India: The 30% Rule, the 1% TDS, and Why a ₹40,000 Loss Does Not Reduce Your Bill

Sell one coin for a ₹1,00,000 gain and another for a ₹40,000 loss in the same year. You made ₹60,000. Your tax is ₹31,200. That is 52% of your actual profit, and it is not a mistake in the return; it is how Section 115BBH is written.

The crypto tax calculator applies every rule below to a list of trades; the crypto profit calculator gives you each trade's gain in rupees first.

The rules in one place

Since 1 April 2022, income from transferring a virtual digital asset (VDA), which covers crypto and NFTs, is taxed under Section 115BBH:

• Flat 30% on the gain, plus 4% health and education cess, plus surcharge if your income is high enough. The rate is the same whether you held for a day or five years. No indexation, no lower long-term rate.
• Only the cost of acquisition is deductible. Exchange fees, gas fees, mining hardware, electricity: none of it reduces the taxable gain.
• No set-off. A VDA loss cannot be set against any other income, and it cannot be set against a gain on another VDA. Coin B's ₹40,000 loss is simply gone.
• No carry-forward. The loss dies with the year.
• The basic exemption limit and the Section 87A rebate do not shelter this income in practice; the 30% applies from the first rupee of gain.

A transfer is any sale, swap or spend. Selling BTC for INR is a transfer; so is swapping BTC for USDT, taxed on the rupee value of the USDT received, and that is the one most people miss. Buying a coin with rupees is not.

Worked example

Two coins, both bought and sold within FY 2025-26:

	Coin A	Coin B
Bought for	₹2,00,000	₹2,00,000
Sold for	₹3,00,000	₹1,60,000
Gain or loss	+₹1,00,000	−₹40,000
Taxed at 30%	₹30,000	nil, and not set off
Cess at 4%	₹1,200	nil
Tax due	₹31,200	₹0

Net profit: ₹60,000. Tax: ₹31,200. Had the loss been allowed, the bill would have been ₹18,720; the extra ₹12,480 is the cost of the no-set-off rule.

The 1% TDS was already deducted on both sales, on the sale value rather than the gain: ₹3,000 on Coin A and ₹1,600 on Coin B, even though Coin B lost money. That ₹4,600 sits in your Form 26AS and is credited against the ₹31,200, leaving ₹26,600 to pay.

The 1% TDS under Section 194S

From 1 July 2022, the buyer of a VDA must deduct 1% of the consideration and deposit it. On an Indian exchange, the exchange does this for you and it appears in your AIS and Form 26AS.

The threshold below which no TDS applies is per financial year, on total consideration, not per trade:

• ₹50,000 for a "specified person": an individual or HUF with no business income, or whose business turnover was ₹1 crore or less (₹50 lakh of professional receipts) in the previous year.
• ₹10,000 for everyone else.

Points that catch people:

• TDS is on the sale amount, so a losing trade still gets 1% deducted.
• In a crypto-to-crypto swap, both sides are transferring a VDA, so TDS can apply on both legs.
• On a peer-to-peer trade or a foreign exchange with no Indian deductor, the buyer has to deduct and file it, using Form 26QE.

Schedule VDA in the return

VDA income goes into Schedule VDA, which exists only in ITR-2 and ITR-3; one crypto transfer in the year rules out ITR-1 and ITR-4. Each transfer needs its dates of acquisition and transfer, cost and sale consideration, classified as capital gains or business income depending on how you trade. Export the full trade history from every exchange you used, including the ones you have left.

Advance tax applies if your total tax for the year, after TDS, is ₹10,000 or more. On the example above, the ₹26,600 balance should have been paid in instalments during the year; leaving it to July attracts interest under Sections 234B and 234C.

Budget 2025 also added a reporting obligation for crypto exchanges, so the department's view of your trades is no longer limited to the TDS trail.

Gifts, airdrops, staking

The law is thinner here, and the treatment below is the common reading rather than settled case law:

• Gifts. A VDA received as a gift is taxable in the receiver's hands under Section 56(2)(x) if the total fair value of such gifts in a year exceeds ₹50,000. Gifts from relatives, and on marriage, are exempt as usual.
• Airdrops and staking rewards. Treated as income at fair market value on the date you receive them, under income from other sources or business income. When you later sell, the 30% applies to the gain over that value.

What people get wrong

• Netting losses against gains. The single most expensive error. Each transfer stands alone.
• Treating the 1% TDS as the tax. It is roughly a thirtieth of what a profitable year owes.
• Filing ITR-1 because salary is the main income. One crypto sale makes it the wrong form.
• Ignoring swaps. BTC to ETH is a taxable transfer at the rupee value on that day.
• Deducting fees. Nothing but the purchase cost comes off.
• Forgetting foreign exchanges. A resident is taxed on VDA gains wherever the exchange sits, and the buyer-side TDS duty may fall on you.

Because the 30% ignores holding period, the timing games that work with equity do not apply. What still matters is your average purchase price, and the DCA calculator shows the average cost of a monthly buy, which is the cost of acquisition the 30% is calculated against.

FAQ

Do I pay tax if I only hold crypto and never sell?

No. The 30% is on transfer. Holding through any rise is untaxed until you sell, swap or spend the coin.

Can I set off crypto losses against stock market gains?

No. VDA losses cannot be set off against any income, including other VDA gains, and cannot be carried forward.

Is the 1% TDS refundable?

Yes. It is a credit against your final tax. If your total tax is lower than the TDS deducted, the difference comes back as a refund after you file.