Crypto tax in India comes down to two rules. Your profit from selling, swapping or spending Bitcoin or any other virtual digital asset is taxed at a flat 30% under section 115BBH, plus surcharge where applicable and 4% cess. And 1% TDS is deducted on the sale value under section 194S (now section 393 under the Income-tax Act, 2025), which you later claim as tax already paid.
On top of those two rules sit two restrictions that catch most people out. The only thing you can deduct is what you paid for the asset. And a loss on crypto cannot reduce tax on anything else, not your salary, not your stocks, not even a gain on another coin, and it cannot be carried forward. That is the whole system. The rest of this post shows you how it works with real rupee numbers.
Thirty people from the tax department, and two employees
I co-founded Unocoin in 2013. I remember that on about day three of the business, around thirty people from the tax department showed up at our office. We had two employees.
That moment shaped how I think about Bitcoin in India. I have never thought of it as something that lives outside the tax system. The government has been watching this space since before most Indians had heard of it, and today it has far more tools than it did then. So my advice to anyone buying their first rupee of Bitcoin is the same advice I would give myself: understand the tax before you buy, not when your ITR is due.
The two rules: 30% on gains and 1% TDS
Rule one: a flat 30% on income from transfers
The Finance Act 2022 inserted section 115BBH into the Income-tax Act. It says income from transferring a virtual digital asset is taxed at 30%. Bitcoin is a VDA. So are other crypto tokens and NFTs.
"Transfer" is wider than "sell". It covers selling for rupees, swapping one coin for another, and spending crypto on something. Each of those can create a taxable gain.
The 30% is flat. It does not matter whether your salary puts you in a low slab or a high one, or whether you held the Bitcoin for a week or five years. There is no lower long-term rate. Add surcharge if your income is high enough, and then 4% health and education cess on the tax.
Rule two: 1% TDS on the sale value
When you transfer a VDA, the person paying you deducts 1% of the payment as TDS and deposits it with the government against your PAN. On an Indian platform, this happens automatically when you sell.
Two things trip people up here. First, TDS is on the sale value, not the profit. Sell ₹1,00,000 of Bitcoin and ₹1,000 is deducted, whether you made money or lost it. Second, TDS is not an extra tax. It is an advance. It shows up in your Form 26AS and Annual Information Statement, and you claim it when you file.
There are small thresholds: no TDS if the total paid in a financial year stays within ₹50,000 where the payer is a "specified person", or ₹10,000 for any other payer. If you have not given your PAN, the rate can jump to 20%. Our TDS guide covers the detail.
What you can and cannot deduct
This is stricter than most people expect. The only deduction allowed is the cost of acquisition, which is what you paid for the Bitcoin you sold. Nothing else.
That means no deduction for platform fees as a separate expense, no deduction for internet or a laptop, no deduction for interest on money you borrowed to buy. If you mined it, the cost of acquisition is treated as zero and electricity and hardware are not deductible either.
The practical lesson: keep a record of what you paid for every purchase. That number is the only thing standing between your sale value and a 30% tax.
Why losses do not help
In most of the tax system, a loss in one place can soften a gain in another. Not here.
Under the VDA rules, a loss cannot be set off against any other income, and it cannot be carried forward to a later year. The site's own example shows it best. Say you made a gain of ₹40,000 on one asset and a loss of ₹30,000 on another in the same year. You might think you owe tax on ₹10,000. You do not. You owe 30% of ₹40,000, which is ₹12,000, plus cess. The ₹30,000 loss reduces nothing.
I wrote more about this in the Bitcoin losses guide. It is the rule that hurts frequent traders the most, and it is one reason I talk about slow, regular buying instead of jumping in and out.
How TDS shows up in 26AS and AIS
After you sell on an Indian platform, the 1% deducted is deposited against your PAN. You can see it in two places on the income tax portal: Form 26AS and your Annual Information Statement (AIS).
Check both before you file. Make sure every sale you remember appears, and that the amounts match your platform statements. When you file, enter the TDS in the tax-paid section so it is credited. If your total TDS for the year is more than the tax you actually owe, the excess is refunded after your return is processed.
The AIS matters for another reason too. It shows what platforms have reported about you. If you leave a small sale out of your return, the department may already have it.
What changed with the Income-tax Act, 2025
The Income-tax Act, 2025 came into force on 1 April 2026 and renumbers many sections. The TDS rule that used to be section 194S now sits in section 393(1) of the new Act. The 1% rate and the ₹10,000 and ₹50,000 thresholds carry over.
The rules described in this post are carried over in substance. But section numbers you see on forms and in old articles may not match the new Act, so check the current numbering with your CA.
Two other changes are worth knowing. From 1 April 2026, the Finance Act 2025 added section 285BAA, which requires prescribed reporting entities such as exchanges to furnish information on crypto-asset transactions, and widened the VDA definition to cover crypto-assets that use cryptographic security and distributed ledger technology. And in July 2026 the CBDT issued guidance on the Crypto-Asset Reporting Framework, under which exchanges report users' 2026 transactions in rupees. None of this is a new tax on you. It does mean the department will see more of your trades, so your ITR should match your platform records.
A worked example
Let us put it all together with a made-up example. Say you buy Bitcoin for ₹2,00,000 over the year. Later you sell part of it, which had cost you ₹1,00,000, for ₹1,40,000. Assume you are above the TDS threshold and your income is not high enough for surcharge.
- Sale value: ₹1,40,000
- Cost of acquisition of what you sold: ₹1,00,000
- Gain: ₹40,000
- Tax at 30%: ₹12,000
- Cess at 4% of the tax: ₹480
- Total tax on the gain: ₹12,480
- TDS already deducted (1% of ₹1,40,000): ₹1,400
- Left to pay when you file: ₹11,080
Now say that in the same year you also sold another coin at a ₹30,000 loss. Your tax stays at ₹12,480. The loss does not reduce it. The TDS on that second sale, though, is still a credit you claim.
The Bitcoin you have not sold is not taxed at all. Tax arises when you transfer, not while you hold.
If you want to run your own numbers, our tax calculator shows the 30% tax, the 4% cess, the TDS already deducted and what is left to pay. It runs in your browser and does not store anything.
Where it goes in your ITR
VDA income is reported in Schedule VDA. That schedule sits in ITR-2 (if you have no business income) and ITR-3 (if you do). You cannot use ITR-1 if you have VDA income. For each sale you enter the date acquired, the date transferred, the cost and the sale value. Report every transfer, including losses and swaps. Our Schedule VDA guide walks through it field by field.
Check with a CA
I am a co-founder of a Bitcoin platform, not your tax adviser. Everything here is the general rule as published. Your situation may have wrinkles: business income, gifts, airdrops, a high income that brings surcharge into play, or trades you made on platforms outside India. A good CA will save you more than they cost.
The one thing I would ask you to do today is open the calculator, put in a realistic sale, and look at the number at the bottom. Knowing it before you buy is the whole point.
Common questions
How much tax is charged on crypto in India?
A flat 30% on income from transferring a virtual digital asset under section 115BBH, plus surcharge where applicable and 4% cess on the tax. On top of that, 1% TDS is deducted on the sale value, which you claim as tax already paid.
Is crypto tax 30% on profit or on the full amount?
The 30% tax is on your gain: sale value minus what you paid. The 1% TDS is on the full sale value, but it is an advance credited to your PAN, not an extra tax.
Is TDS on crypto refundable?
TDS is credited against your total tax for the year. If the TDS deducted is more than the tax you owe, the excess is refunded after you file your return and claim it in the tax-paid section.
Can I deduct trading fees from crypto gains?
Only the cost of acquisition is deductible under the VDA rules; no other expense or allowance. Ask a CA how platform fees are reflected in your cost and sale figures.