Introduction
Today, many people in India are buying cryptocurrency like Bitcoin, Ethereum, and other digital coins. Some people invest to earn money, while others trade daily, and some use crypto to pay online. Crypto is modern digital money that works on the internet without banks. But one big problem is that many people do not understand crypto tax. Since 2022, the Indian government has made strict rules for crypto taxes. These rules are still followed the same now.
Even if you buy, sell, get, or use crypto, you have to follow the rules. If you don’t, you could get fines and have to pay extra interest. You will also face legal trouble. The government can see crypto transactions through exchanges and the blockchain, so don’t even think about hiding anything. This guide will explain crypto tax in india clearly, step by step, as follows.
What Is Cryptocurrency and Why Is It Called VDA in India?
Cryptocurrency is digital money. It exists only on the internet and is usually stored in digital wallets. It is protected by blockchain technology, which keeps every transaction safe and public. This indeed makes crypto hard to hack or fake.
In India, crypto is not called currency in tax laws. The government calls it Virtual Digital Asset (VDA). This includes Bitcoin, Ethereum, NFTs, and all digital tokens that have value and can be traded online. So, for tax purposes, crypto is treated like a digital asset, not like Indian Rupees or dollars. That is why special tax rules apply to crypto.
You should also know that Virtual Digital Assets (VDAs) are classified under different heads for income tax purposes. If you are holding crypto as an investment, profits are considered capital gains. If you are trading frequently, it falls under business income. Also, you should treat income from gifts, airdrops, or mining rewards as income from other sources.
How Much Tax Do You Pay on Cryptocurrency in India?
India introduced a crypto tax on 1 April 2022, and the rules are still the same in 2026. If you did make money from crypto, then you have to pay 30 percent tax. This tax is applicable to anyone.
Profit is the extra money you earn when you sell crypto. For example, if you buy crypto for ten thousand rupees and later sell it for twenty thousand rupees, your profit is ten thousand rupees. You will indeed have to pay 30 percent tax on that amount.
You cannot lower your tax by including bills or fees like internet, electricity, or brokerage charges. Only the amount you originally paid to buy the crypto is counted. By now, you will have realised how strict cryptocurrency tax rules are. So it’s important to keep track of your buying and selling carefully.
What Is 1% TDS on Crypto Transactions?
Apart from 30% tax, India also introduced 1% TDS on crypto transactions. This means when you buy crypto, 1% of the transaction amount is deducted and sent to the government. For example, if you buy crypto worth ₹10,000, ₹100 is deducted as TDS.
For individuals and small investors, TDS applies if total crypto transactions are more than ₹50,000 in a year. For companies and big traders, the limit is ₹10,000. TDS is deducted on every trade, even if you make a loss. Later, you can adjust this TDS when filing your income tax return.
Many traders complain that 1% TDS reduces their trading capital, but the government has not removed it till 2026. Also, the Income Tax Return has a special section called Schedule VDA for reporting crypto gains. If you earn profit from crypto, you should declare it under this section while filing your ITR. This helps the government track crypto transactions and ensures your TDS and tax payments are properly adjusted.
Which Crypto Activities Are Taxable in India?
Many people think tax applies only when they convert crypto to cash. This is not true. In India, many crypto activities are treated as taxable transfers. Selling crypto for Indian Rupees is taxable. Swapping one coin for another coin is also taxable. For example, if you exchange Bitcoin for Ethereum, it is treated as selling Bitcoin and buying Ethereum. Using crypto to buy products or services is also taxable. If you pay for a phone or online service using crypto, you must pay tax on the profit made on that crypto. Receiving crypto as a gift is also taxable in most cases. Selling NFTs, mining rewards, and staking rewards are also taxable. So, even if money does not come to your bank account, tax can still apply.
What Happens If You Lose Money in Crypto?
This is the most painful rule for Indian crypto investors. If you make a loss in crypto, you cannot use that loss to reduce your tax. You cannot adjust crypto loss with salary income, stock profits, business income, or property income. You also cannot carry forward crypto losses to future years. This means if you lose money this year, you cannot use it to reduce taxes next year. So, only profits are taxed, and losses are ignored. This makes crypto trading risky in India.
What Are the Latest Crypto Tax Updates in 2026?
In 2026, the crypto tax rules will still be the same. The government has not reduced the 30% tax or 1% TDS. Many investors expected changes, but no big relief was given. The government is watching crypto users more closely. Crypto exchanges in India share data with the tax department. Since all blockchain transactions are public, it’s hard to hide crypto profits. India may add more rules in the future, so investors should keep an eye on updates.
Simple Tips to Follow Crypto Tax Rules
- Keep a record of every crypto transaction
- Write down the buying and selling prices
- Check TDS in your tax statement
- Declare crypto income on your tax return
- Ask a tax expert if you trade a lot
Common Mistakes People Make
Many people think tax applies only when converting crypto to cash. Some people forget to report crypto swaps, gifts, and NFTs. Others try to adjust crypto losses with salary or stock profits, which is not allowed. Some people also forget to check TDS credits and do not declare crypto income. These mistakes can lead to tax notices and penalties.
Conclusion
Cryptocurrency tax in India is strict but clear. All digital money, like cryptocurrencies and NFTs, is called Virtual Digital Assets in India. If you make money from crypto, you pay 30% tax, and 1% TDS is taken from many transactions. Most crypto activities are taxed, like selling, swapping, giving as a gift, or buying things with crypto. If you lose money, you cannot use that loss to pay less tax. So be careful. Keep records, report your income, and follow tax rules to avoid problems. If you want to invest in crypto in India, first learn the tax rules. You can also take help from Finprov Learning, which offers accounting courses in Calicut, to understand taxes better and make smarter investment decisions.
FAQs
- Is cryptocurrency legal in India?
Yes, cryptocurrency is legal in India. However, it is not treated as our normal money. The government indeed allows people to buy, sell, and trade crypto. Even though there are strict tax rules for it. This means that while using crypto is allowed, you must follow the laws carefully to avoid fines or legal problems.
- How much tax do I pay on crypto profit?
If you make a profit from crypto, you do have to pay a 30 percent tax on your earnings. You also have to pay an additional surcharge and cess depending on your total income. This tax rate is the same for everyone, even if you are a student or a trader.
- What is TDS on crypto?
TDS stands for Tax Deducted at Source. For crypto, 1 percent TDS is deducted automatically on purchases above certain limits. This money is sent directly to the government. The purpose of TDS is to track crypto transactions and make sure taxes are collected properly.
- Can I reduce tax using crypto loss?
No, you cannot reduce your tax using losses from crypto. Crypto losses cannot be adjusted against salary, business income, or stock market profits. You also cannot carry forward these losses to the next year. Only the profits from crypto are taxable.
- Is holding crypto taxable?
No! Just holding or keeping crypto in your wallet is not taxable. Tax applies only when you sell it, swap it for another crypto, gift it to someone, or use it to buy products or services.
