Crypto Tax in India 2026: How ₹2 Lakh Gains Face 30% Flat Tax

If you bought Bitcoin, Ethereum, or any other virtual digital asset (VDA) during the last bull run and finally booked a profit, you may be in for a rude shock when you sit down to file your return. Crypto in India is not taxed like equity, not like a fixed deposit, and definitely not like a business you can offset losses against. It sits in a punishing category all its own — a flat 30% tax on gains, plus a 1% TDS that quietly eats into every single trade you make.

Here is the number that stings the most: if you made ₹2 lakh profit on one coin and lost ₹1.5 lakh on another in the same year, you cannot net them off. You still pay 30% on the full ₹2 lakh. That is ₹60,000 gone, even though your real economic gain was only ₹50,000. This is not a loophole waiting to be fixed — it has been the law since April 2022, and nothing in the current framework changes it going into FY 2025-26 and beyond.

In this guide I'll break down exactly how crypto is taxed, walk you through a full worked example with rupee figures, show you the TDS trap most traders miss, and give you a filing checklist so you don't overpay or get a notice. Let's make sure you know your real take-home before the taxman does.

Key Takeaways

• Crypto gains are taxed at a flat 30% (plus 4% cess) under Section 115BBH — regardless of your income slab or holding period.
• A 1% TDS applies under Section 194S on transfers above ₹10,000 (₹50,000 for specified persons) per year — this is deducted at the point of sale, not at year-end.
• Losses cannot be set off against gains from other cryptos, nor carried forward to future years. Every profitable trade is taxed in isolation.
• Only the cost of acquisition is deductible — no exchange fees, no gas fees, no interest on borrowed money.
• The 30% applies to gains booked, gifts received, and crypto earned (mining, staking, airdrops) — reported under Schedule VDA in your ITR.
• Plan your exits: since losses are stranded, timing and record-keeping matter more than in any other asset class.

How does crypto tax in India 2026 actually work?

The taxation of virtual digital assets is governed by Section 115BBH of the Income Tax Act, introduced in the Finance Act 2022. It defines VDAs to include cryptocurrencies, NFTs, and other tokens notified by the government. The rules are deliberately rigid, and here's the core of them:

• Flat 30% tax on income from the transfer of any VDA. Add the 4% health and education cess and your effective rate is 31.2%. If you're in a high-income bracket, surcharge can push it even higher.
• No slab benefit. Whether your total income is ₹5 lakh or ₹50 lakh, crypto gains are taxed at the same flat rate — you don't get the ₹2.5L or ₹3L basic exemption applied to them.
• No deductions except the cost of acquisition. You cannot claim exchange trading fees, withdrawal charges, internet costs, or advisory fees.
• No set-off of losses. Loss from one VDA cannot offset gain from another VDA, and cannot offset any other income (salary, capital gains, business income).
• No carry-forward. A crypto loss this year simply vanishes — you can't use it next year.

Compare this to equity mutual funds, where you enjoy a ₹1.25 lakh long-term exemption and can carry losses forward for eight years. If you're used to how equity works, read our breakdown of SIP capital gains tax to see just how much gentler that regime is by comparison.

What is the 1% TDS on crypto and why does it matter?

Separate from the 30% tax, Section 194S imposes a 1% TDS on the transfer of VDAs. This is a withholding tax deducted at the time of the transaction — usually by the exchange — and credited against your final tax liability.

The thresholds:

• ₹50,000 per financial year for specified persons (individuals/HUFs whose turnover doesn't cross the audit limit and who don't have business income from VDAs).
• ₹10,000 per financial year for everyone else.

Here's what trips people up: the 1% TDS applies on the sale value, not on your profit. So even if you sell at a loss, TDS is still deducted. And for active traders who churn positions repeatedly, that 1% on every sell order stacks up fast — it locks up working capital until you claim it back at filing.

Common mistake: Many traders assume the 1% TDS is the "total tax" and stop worrying. It isn't — it's an advance. If your gain is genuine, you still owe the full 30% at filing, minus whatever TDS was already deducted. Ignoring this leads to a nasty balance-due surprise plus interest under Sections 234B and 234C.

Where does the TDS get deducted?

If you trade on an Indian exchange, they deduct the 1% and deposit it against your PAN. On peer-to-peer or foreign platforms, the responsibility of deducting and depositing TDS technically falls on the buyer — a compliance headache most retail users never handle correctly. This is one reason regulated Indian exchanges have become the safer route.

Worked example: How ₹2 lakh in gains gets taxed

Let's take a realistic case. Meet Rahul, a salaried professional earning ₹14 LPA. During FY 2025-26 he made two crypto trades:

• Trade A: Bought Bitcoin for ₹3,00,000, sold for ₹5,00,000 → gain of ₹2,00,000
• Trade B: Bought an altcoin for ₹2,50,000, sold for ₹1,00,000 → loss of ₹1,50,000

Intuitively, Rahul thinks his net gain is ₹2,00,000 − ₹1,50,000 = ₹50,000, and he should pay 30% on that, i.e. ₹15,000. Wrong.

Because losses cannot be set off, the tax is calculated only on the profitable trade:

Item	Amount (₹)
Gain on Trade A (taxable)	2,00,000
Loss on Trade B (ignored — cannot set off)	(1,50,000)
Taxable VDA income	2,00,000
Tax @ 30%	60,000
Health & education cess @ 4%	2,400
Total tax on crypto	62,400

Now factor in Rahul's real economic position. He made ₹50,000 in actual money but pays ₹62,400 in tax. His effective tax rate on his real gain is over 124% — he loses more than he earned. This is the brutal reality of the no-set-off rule.

Adding the TDS layer

On Trade A's sale of ₹5,00,000, the exchange deducted 1% TDS = ₹5,000. On Trade B's sale of ₹1,00,000, another 1% = ₹1,000. Total TDS deducted: ₹6,000. This ₹6,000 is credited against his ₹62,400 liability, so at filing Rahul pays the remaining ₹56,400.

If you want to sanity-check how your slab income and crypto tax combine on your total return, run the salary portion through our Income Tax Calculator first, then add the flat 30% crypto figure on top separately — the two are computed independently.

How does crypto tax compare to other investments?

To see how uniquely harsh the crypto regime is, here's a side-by-side comparison of a ₹2,00,000 gain across four common Indian asset classes (assuming a long-term holding and a taxpayer in the 30% slab where applicable):

Asset	Tax Rate on Gain	Loss Set-off Allowed?	Tax on ₹2L Gain
Equity Mutual Fund (LTCG)	12.5% above ₹1.25L exempt	Yes (against capital gains, 8-yr carry-forward)	~₹9,375
Fixed Deposit interest	As per slab (up to 30%)	N/A (income)	Up to ₹60,000
Debt Mutual Fund	As per slab	Yes (against capital gains)	Up to ₹60,000
Crypto / VDA	Flat 30% + cess	No — none	₹62,400

The takeaway is stark: crypto is taxed at the highest possible rate and denies you every softening feature other assets enjoy. Even a fixed deposit — which no one considers tax-efficient — lets your losses elsewhere reduce your overall burden. Compare the safer, tax-friendly compounding of an FD or PPF using our FD Calculator or PPF Calculator before deciding where fresh money should go.

How is crypto earned from staking, mining and airdrops taxed?

The 30% rule isn't limited to buy-and-sell profits. The following are all taxable:

• Mining rewards, staking rewards, airdrops: Taxed as income at the fair market value on the date you receive them. When you later sell those coins, any further gain is again taxed at 30%.
• Crypto received as a gift: Taxable in the recipient's hands at fair market value if it exceeds ₹50,000 in a year (gifts from close relatives are exempt, similar to other gift rules).
• Salary paid in crypto: Taxed as salary at your slab rate on receipt, then any appreciation on sale is a VDA gain at 30%.
• Payment received in crypto for services: If you're a freelancer or creator, this is business/professional income at slab rates — but on disposal, the 30% VDA rule kicks in. Creators juggling multiple income streams should read our guide on content creator tax in India.

The double-taxation trap

Notice how staking rewards can be taxed twice — once as income when received, and again on the gain when sold. Keep a dated record of the fair market value at receipt; that becomes your cost of acquisition and prevents you from being taxed on the same value twice.

Step-by-step: How to calculate and file your crypto tax

1. Download all transaction statements from every exchange and wallet you used during the financial year (1 April to 31 March). Include buys, sells, transfers, and reward credits.
2. Separate profitable trades from loss-making trades. List each disposal with its sale value, cost of acquisition, and gain/loss.
3. Sum only the gains. Remember — losses are ignored entirely. Total up every positive gain across the year.
4. Apply 30% + 4% cess to that gain total. This is your gross crypto tax.
5. Add income from staking, mining and airdrops at their fair market value on receipt, taxed at the same 30% (for the reward value treated as VDA income).
6. Collect your TDS credits. Check Form 26AS and the AIS (Annual Information Statement) on the income-tax portal — every 1% TDS deducted should appear against your PAN. Reconcile with your exchange TDS certificates.
7. Report under Schedule VDA in your ITR (ITR-2 for investors, ITR-3 if you trade as a business). Enter each transaction's cost, sale value, and date.
8. Pay the balance tax after adjusting TDS. If your total tax liability crosses ₹10,000 for the year, ensure advance tax is paid quarterly to avoid interest under 234B/234C.

Pro tip: The Annual Information Statement now captures most crypto transactions from Indian exchanges. If you under-report, the mismatch flags automatically. Always file with your AIS open in another tab and reconcile line by line — the ₹5,000 you might "save" by omitting a trade is not worth a Section 148 reassessment notice three years later.

Should you still invest in crypto given this tax structure?

That's a portfolio decision, not just a tax one — but tax should absolutely inform your position sizing. Because you can't offset losses, crypto amplifies downside risk in a way equity does not. A diversified equity SIP that loses value at least lets you harvest that loss against gains. Crypto gives you no such safety net.

For most retail investors, the practical approach is: treat crypto as a small satellite allocation (say 5% or less of your risk capital), keep meticulous records, and never invest borrowed money into it. If you're comparing the long-term wealth outcome of a disciplined equity SIP versus a speculative punt, plug realistic numbers into our SIP Calculator — a ₹10,000/month SIP at 12% CAGR over 15 years compounds to roughly ₹50 lakh, and that growth enjoys far kinder tax treatment.

Also remember inflation. A "30% flat tax" on a nominal gain means your real after-tax, after-inflation return can be thin or negative. Test it with our Inflation Calculator to see what your gain is really worth in today's rupees.

Crypto tax in India 2026: the bottom line

Nothing about the current framework makes crypto tax-friendly, and there's no sign of the 30% flat rate, the no-set-off rule, or the 1% TDS being softened. Understanding crypto tax in India 2026 means accepting three hard truths: you'll pay a flat 30% on every profitable trade, you can't use your losses to reduce that bill, and 1% of every sale is withheld along the way.

The investors who come out ahead aren't the ones chasing the hottest coin — they're the ones who keep clean records, reconcile with their AIS, pay advance tax on time, and size their crypto exposure small enough that a stranded loss never derails their financial plan. Book gains deliberately, not emotionally, and know your exact after-tax figure before you sell.

Explore all of our free financial calculators to model your salary, taxes, and investments in one place, and if you have a specific situation you'd like us to cover, get in touch — we build our guides around the questions readers actually ask.

Frequently Asked Questions

Can I set off my crypto losses against my crypto gains?

No. Under Section 115BBH, loss from the transfer of one VDA cannot be set off against gain from another VDA, nor against any other head of income. Each profitable trade is taxed at 30% in isolation, and losses cannot be carried forward.

Is the 1% TDS on crypto the same as my final tax?

No. The 1% TDS under Section 194S is only an advance/withholding tax deducted at the point of sale. Your actual liability is 30% plus cess on your gains. The TDS already deducted is adjusted against this final amount when you file, and you pay the balance.

Do I pay tax if I just hold crypto without selling?

No. Tax under the VDA rules is triggered on transfer — selling, swapping one coin for another, or spending it. Simply holding a coin as its price rises does not create a taxable event. However, staking or airdrop rewards are taxable when received, even if you don't sell.

Which ITR form do I use to report crypto income?

Use Schedule VDA within ITR-2 if you hold crypto as an investment, or ITR-3 if you trade as a business or have other business income. Report each transaction's date, cost of acquisition, and sale value.

Can I claim exchange fees or gas fees as a deduction?

No. The only deduction permitted against a VDA gain is the cost of acquisition. Trading fees, withdrawal charges, gas fees, and advisory costs are not deductible, which further inflates your taxable gain.

Does the ₹2.5 lakh basic exemption apply to crypto gains?

No. Because crypto is taxed at a special flat rate under Section 115BBH, the basic exemption limit and slab benefits do not apply to it. Even a person with total income below the taxable threshold pays 30% on crypto gains.

What happens if I don't report my crypto transactions?

Indian exchanges report transactions and TDS to the tax department, which populate your AIS and Form 26AS. Any mismatch can trigger an automated notice, and unreported income can attract penalties and interest under Sections 234B, 234C, and reassessment provisions. Always reconcile and disclose in full.

Image credit: Personal Income Taxes Ver5 — ccPixs.com, via flickr (BY 2.0), sourced from Openverse.