The Income Tax Department (ITD) has not provided specific guidance on cryptocurrency taxation for Indian investors. However, the Income Tax Act includes relevant provisions that apply to Virtual Digital Assets (VDAs), such as Section 115BBH and Section 194S. These sections cover the taxation of cryptocurrencies, NFTs, tokens, and other digital assets.
Under the current tax rules:
- Profits from selling, trading, or spending crypto are subject to a 30% flat tax, regardless of the holding period.
- A 1% Tax Deducted at Source (TDS) applies to all crypto transactions above a specified threshold.
- Income from activities like mining, airdrops, and staking may be taxed at the investor’s individual slab rate rather than the 30% flat tax.
This guide provides the most up-to-date information on crypto taxation in India for 2025, including how to report crypto profits, TDS deductions, and filing Schedule VDA in the Income Tax Return (ITR).
Crypto Tax Rate in India (2025)
The Indian government imposes a 30% tax on profits from trading, selling, or spending cryptocurrency. Additionally, a 1% TDS (Tax Deducted at Source) applies to crypto transactions exceeding ₹50,000 in a financial year (₹10,000 for certain taxpayers). Earnings from staking, mining, or airdrops are taxed based on the recipient’s income tax slab.
Latest Crypto Tax Updates in India
Over the past few years, the Income Tax Department (ITD) has provided several updates regarding the taxation of Virtual Digital Assets (VDAs), including cryptocurrencies and NFTs. Below are the latest changes in crypto tax regulations:
2024 Updates
- The Income Tax Return (ITR) for FY 2023-24 now includes a dedicated section called Schedule Virtual Digital Assets (VDA), where taxpayers must report their crypto gains.
- The deadline to file the ITR for FY 2023-24 is July 31, 2024. However, taxpayers can submit a belated return until December 31, 2024.
2023 Updates
- Taxpayers must classify crypto earnings as either capital gains (if held as an investment) or business income (if traded frequently).
- Individuals earning crypto as business income must use ITR-3 instead of ITR-2.
- The government introduced penalties for failing to deduct or deposit TDS under Sections 271C and 276B.
2022 Updates
- The government clarified Section 115BBH, stating that investors cannot offset crypto losses against profits from other assets or income sources.
- The cost of acquisition is the only deductible expense when calculating taxable crypto gains.
- Gifting cryptocurrency or NFTs is taxable for the recipient.
Key Crypto Tax Laws Introduced in 2022
- April 1, 2022: A 30% tax on crypto gains came into effect.
- July 1, 2022: A 1% TDS on crypto transactions became mandatory.
- Budget 2022 introduced Section 194S, enforcing 1% TDS on crypto transactions exceeding ₹50,000 (₹10,000 for certain taxpayers).
- Section 115BBH imposed a 30% tax on crypto income, along with a 4% health and education cess.
- Section 2(47A) was added to the Income Tax Act to formally define and classify Virtual Digital Assets (VDAs).
Crypto Taxation in India – Key Rules
- The Finance Act 2022 was the first law in India to recognize Virtual Digital Assets (VDAs) like cryptocurrency and introduced a tax framework for them.
- Any profit from selling, trading, or using cryptocurrency is taxed at a flat rate of 30%, regardless of how long it was held.
- Losses from crypto cannot be adjusted against profits or carried forward to future years.
- A 1% TDS applies to crypto transactions. Exchanges may deduct this automatically, but for peer-to-peer (P2P) trades on international platforms, investors must deduct and deposit the 1% TDS themselves.
- Income from activities like crypto mining, airdrops, and staking is taxed at the individual’s regular income tax slab rate.
- Crypto gains must be reported in the Schedule VDA section of the Income Tax Return (ITR) for the financial year 2023-24 (assessment year 2024-25).
Overview of Cryptocurrency Taxation in India
The Indian government classifies cryptocurrencies and other digital assets as Virtual Digital Assets (VDAs) under the Income Tax Act. Investors and traders must comply with specific tax rules when dealing with crypto transactions. Below is a breakdown of how cryptocurrency taxation works in India.
What Are Virtual Digital Assets (VDAs)?
The Income Tax Act, under Section 2(47A), defines VDAs to include all types of crypto assets, such as:
- Cryptocurrencies (e.g., Bitcoin, Ethereum)
- Non-Fungible Tokens (NFTs)
- Digital tokens and similar blockchain-based assets
Crypto Tax Rates in India Under Section 115BBH
- The Union Budget 2022 introduced Section 115BBH, which enforces a flat 30% tax on profits made from trading cryptocurrencies.
- This tax applies from April 1, 2022, onwards, and includes an additional 4% health and education cess on the total tax amount.
- There is no distinction between short-term and long-term gains—the 30% tax applies regardless of how long you hold the asset.
1% TDS on Crypto Transactions Under Section 194S
- Since July 1, 2022, a 1% TDS (Tax Deducted at Source) is deducted when transferring crypto assets.
- TDS applies if the annual transaction value exceeds ₹50,000 (₹10,000 in some cases).
- This rule ensures that all crypto transactions are tracked and reported to the tax authorities.
Taxation on Crypto Transactions in India
| Transaction | Tax Treatment |
| Buying crypto | 1% TDS deducted by exchange (except international & P2P trades where the buyer must deduct TDS). |
| Selling crypto | 30% tax on any profit made from the sale. |
| Trading one crypto for another | 30% tax on any profit from the trade. |
| Spending crypto on goods/services | 30% tax on any profit when crypto is used for purchases. |
| Holding crypto | No tax applies while holding, as long as no transaction occurs. |
| Transferring crypto between personal wallets | No tax applies since no sale or profit is made. |
| Receiving airdropped crypto | Taxed at individual income tax rates upon receipt; 30% tax applies if later sold for a profit. |
| Receiving crypto from a hard fork | Taxed at individual income tax rates when received; 30% tax applies when sold later. |
| Receiving crypto as a gift | The recipient is taxed, unless the gift is from a close family member or valued below ₹50,000. |
| Donating crypto | 30% tax on any profit before donation; crypto donations are not tax-deductible. |
| Earning mining rewards | Taxed at individual income tax rates when received; 30% tax applies when sold later. |
| Earning staking rewards | Taxed at individual income tax rates when received; 30% tax applies when sold later. |
Understanding the 1% TDS on Crypto in India
The Indian government introduced a 1% Tax Deducted at Source (TDS) on crypto transactions to improve transparency and track investments.
What is the 1% TDS on Crypto?
TDS applies when there is a transfer of ownership, such as selling, trading, or using crypto, but not when moving assets between wallets.
Key Details on 1% TDS:
- Effective Date: This rule has been in effect since July 1, 2022.
- Deduction Responsibility:
- If trading on an Indian exchange, the exchange deducts and deposits TDS automatically.
- For P2P and international trades, the buyer must deduct and deposit TDS with the government.
- In crypto-to-crypto trades, both the buyer and the seller must pay 1% TDS each.
Exemptions and Compliance:
- If a specified person (individual or Hindu Undivided Family) conducts the transaction, no TDS is required if total crypto trades in a year are below ₹50,000 (for other taxpayers, this limit is ₹10,000).
- TDS Filing Requirements:
- Specified persons must file Form 26QE within 30 days after the month of deduction.
- Other taxpayers must obtain a TAN, file Form 26Q quarterly, and deposit TDS by the 7th of the next month.
Penalties for Not Paying TDS:
- Failure to deduct TDS (Section 271C): A penalty equal to the unpaid TDS amount.
- Failure to deposit TDS (Section 276B): Penalties range from fines to imprisonment for up to 7 years.
Tax Guide for DeFi Transactions in India
Decentralized Finance (DeFi) allows users to access financial services like lending, borrowing, and trading without traditional banks. Since the Income Tax Department (ITD) has not issued specific guidelines for DeFi taxation, these transactions fall under the general rules for Virtual Digital Assets (VDAs).
- The government taxes income from liquidity mining, governance participation, and reward tokens at the recipient’s income tax slab rate upon receipt.
- Tax authorities apply individual slab rates to earnings from referral rewards and play-to-earn platforms like Brave or Permission.io when users receive them.
- When individuals sell, swap, or spend these tokens later, they must pay a 30% tax on any profits earned.
Do You Pay Tax When Selling Crypto in India?
- Selling crypto for INR (fiat currency) is subject to:
- 30% tax on profits.
- 1% TDS, deducted by Indian exchanges or manually deposited for P2P/international trades.
- Trading crypto for another crypto also attracts 30% tax on gains and 1% TDS on the transaction.
Do You Pay Tax When Buying Crypto in India?
- Buying crypto with INR is tax-free. However, a 1% TDS applies to transactions exceeding ₹50,000 (₹10,000 for some cases).
- If purchasing via an Indian exchange, the TDS is deducted automatically.
- In P2P or international trades, the buyer must deduct and deposit the TDS.
- Holding crypto (HODLing) does not trigger any tax.
- Crypto-to-crypto trades are taxable at 30% on any profits.
- Buying crypto with stablecoins like USDT is treated as a crypto-to-crypto trade and is taxed accordingly.
Do You Pay Tax When Transferring Crypto?
- Transferring crypto between your own wallets is tax-free.
- Since ownership does not change, it is not considered a taxable event.
Taxation of Airdrops and Forks in India
In India, the taxation of airdrops and forks follows specific rules. Soft forks do not create new coins, so they are not taxable. When individuals receive new coins from a hard fork, they must pay taxes based on their income slab rate, calculated using the fair market value on the day of receipt. If platforms distribute airdropped tokens, recipients must report them as income and pay taxes according to their applicable slab rate. If they later sell these tokens, they must pay a 30% tax on any profits earned.
Crypto gifts from close family members such as parents, spouses, and siblings are tax-free, and gifts worth less than ₹50,000 in a financial year are also exempt from tax. Additionally, gifts received during weddings or as inheritance do not attract any tax. However, if a gift exceeds ₹50,000, the recipient must pay tax based on their applicable slab rate. Donating crypto is not tax-deductible, and any profits made before the donation are taxed at 30%.
How to Report Crypto Income in India
- If an investor holds crypto as an investment, the profits must be reported as capital gains in the Income Tax Return (ITR).
- If an individual trades crypto frequently, the earnings are treated as business income and taxed accordingly.
How to File Crypto Taxes in India
- Starting FY 2022-23, the government introduced Schedule Virtual Digital Assets (VDA) in the Income Tax Return (ITR) forms.
- Investors must report crypto gains and losses separately in this section when filing their tax returns.
- This requirement continues in the ITR for FY 2023-24 (Assessment Year 2024-25).
When Does the 30% Crypto Tax Apply?
The flat 30% tax applies in the following cases:
- Selling crypto for INR or any fiat currency
- Trading one cryptocurrency for another, including stablecoins
- Using cryptocurrency to buy goods or services
However, some crypto transactions are not immediately subject to the 30% tax. Instead, the Income Tax Department (ITD) may classify them as income taxable under individual slab rates in the following cases:
- Receiving cryptocurrency as a gift (subject to gift tax rules)
- Mining cryptocurrency (classified as business income)
- Getting paid in crypto for services or freelance work
- Earning staking rewards or airdrops
Once these assets are sold, traded, or spent, any profit made will be taxed at 30% under Section 115BBH.
Crypto Losses: What Indian Investors Need to Know
Under Section 115BBH, investors cannot offset crypto losses against gains from other cryptocurrencies or asset classes. The law does not allow deductions for expenses like transaction fees, and the only deductible cost is the original acquisition price of the asset.
Tax-Free Crypto Transactions in India
Not all crypto activities are taxable. Some tax-free cases include:
- Holding (HODLing) crypto without selling.
- Transferring crypto between personal wallets.
- Receiving gifts from family members.
- Gifts worth up to ₹50,000 from non-family members.
How to File Your Crypto Taxes in India
For the financial year 2023-24 (Assessment Year 2024-25), filing your crypto taxes depends on how you classify your income. The Income Tax Department requires taxpayers to use either ITR-2 or ITR-3 based on the nature of their crypto earnings.
- ITR-2: Select this form if you report crypto profits as capital gains.
- ITR-3: Use this form if your crypto income falls under business earnings.
Both forms include “Schedule VDA” (Virtual Digital Assets), where you must declare profits, losses, or any income earned from cryptocurrency transactions, NFTs, and other digital assets.
How to Calculate Crypto Taxes in India with Catax
Before filing your taxes, calculating your crypto tax liability accurately is important to avoid discrepancies and unexpected penalties. With multiple transactions, changing regulations, and TDS deductions, staying compliant requires a structured approach. Catax provides a reliable way to calculate taxes with precision and transparency.
You can use Catax to:
- Track all crypto transactions across various exchanges and wallets.
- Calculate capital gains, taxable income, and TDS deductions based on Indian tax laws.
- Generate well-structured tax reports for easy reference when filing your Income Tax Return (ITR).
- Avoid manual errors and miscalculations that could lead to penalties.