Crypto and Virtual Digital Assets: 30% Tax, 1% TDS and No Loss Set-Off (Tax Year 2026-27)

Last updated: 18 September 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

India taxes cryptocurrency and similar assets under a special regime that is harsher than the rules for shares or property. It is in section 194 of the Income-tax Act, 2025 (earlier section 115BBH), with TDS in section 393. This post sets out how it works for tax year 2026-27.

What is a virtual digital asset

Section 2(111) covers:

• any information, code, number or token (not Indian or foreign currency), generated through cryptographic means or otherwise, which gives a digital representation of value, with the promise of inherent value or functioning as a store of value or unit of account, and which can be transferred, stored or traded electronically;
• a non-fungible token (NFT) or any other token of similar nature;
• any other digital asset notified by the Central Government; and
• any crypto-asset that is a digital representation of value relying on a cryptographically secured distributed ledger or similar technology to validate and secure transactions.

The Central Government may notify a digital asset to be excluded from the definition.

The tax: section 194(1), Table serial 4

This means:

• There is no distinction between short-term and long-term, and no benefit of the lower rate or the ₹1,25,000 exemption that applies to shares.
• Expenses such as exchange fees, brokerage, internet and electricity cannot be deducted.
• Losses are ring-fenced: a loss on one coin cannot reduce the gain on another coin in the same year, and cannot reduce salary, business or other income.
• The tax is 30% plus surcharge and 4% cess.

TDS: 1% on payment (section 393(1), Table serial 8(vi))

Any person paying a sum as consideration for the transfer of a virtual digital asset deducts tax at 1%, with no threshold limit. The seller takes credit for the TDS in the return.

Gifts of crypto

A virtual digital asset is “property” for the gift rule in section 92(2)(m). If you receive it from a non-relative without consideration, with an aggregate fair market value above ₹50,000 in a year, or for less than its fair market value by more than ₹50,000, the value is taxed as income from other sources. Gifts from relatives, on marriage, by will or inheritance, and the other cases in section 92(3) are not taxed.

Examples

1. Gain. You buy a token for ₹1,00,000 and sell it for ₹1,80,000.

• Income from transfer: 1,80,000 - 1,00,000 = ₹80,000
• Tax: 30% = ₹24,000, plus 4% cess ₹960 = ₹24,960
• TDS at 1% of ₹1,80,000 = ₹1,800 is credited against this.

2. Loss and gain in the same year. You make a gain of ₹80,000 on one token and a loss of ₹20,000 on another. The tax is on the full ₹80,000, because the loss cannot be set off: 80,000 × 30% = ₹24,000 plus cess. The ₹20,000 loss is lost.

3. Fees. You paid ₹2,000 in exchange fees on example 1. They are not deductible. The income remains ₹80,000.

Reporting

• Report income from the transfer of virtual digital assets in the return, in the schedule provided for it, even if you made a loss, with the cost, date and sale value of each transfer.
• Use the return form you are eligible for (see our post on which ITR form to file); this income is normally reported in ITR-2 or ITR-3.
• Pay advance tax on the gains as they arise.
• Keep exchange statements, wallet records and bank proofs. If you hold the VDA as a business (a trader), the 30% regime still applies to the transfer income; the cost of acquisition is the only deduction.

Practical advice

1. Do not plan on losses to reduce tax: they are not usable, so avoid churning to book losses.
2. Check that the exchange has deducted 1% TDS and that it appears in your TDS statement.

Frequently asked questions

Official sources

• Income Tax Department: Income-tax Act, 2025 (sections 2(109), 2(111), 92, 194, 393)

Related reading

• What is Income Tax? Meaning, Rules, Tax Slabs, Types and Tax Guide for Tax Year 2026-27
• Decoding the Direct Tax Landscape: Budget 2025 Insights
• Required Documents for ITR compliances – FY 2024-25

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

30% tax, Bitcoin, Crypto tax, NFT, Section 194, TDS on crypto, VDA, Virtual digital asset

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