How is Cryptocurrency Taxed in India? Complete Guide for FY 2024–25
Cryptocurrency has taken India by storm. With millions of Indians trading Bitcoin, Ethereum, and hundreds of altcoins, one question comes up again and again: how exactly is crypto taxed in India? If you're confused by Section 115BBH, Section 194S, and what "Virtual Digital Assets" actually means — this guide explains everything clearly, with real examples.
What counts as a Virtual Digital Asset (VDA)?
The Indian government introduced the term "Virtual Digital Asset" in the Finance Act 2022. A VDA includes any information, code, number, or token generated through cryptographic means, including:
- Cryptocurrencies — Bitcoin (BTC), Ethereum (ETH), Solana (SOL), etc.
- Non-Fungible Tokens (NFTs)
- DeFi tokens and governance tokens
- Stablecoins like USDT, USDC (when traded)
- Any other digital token defined by the government
Foreign currencies and digital representations of fiat currency (like digital rupee / CBDC) are not classified as VDAs.
Section 115BBH: The 30% Flat Tax Rule
Section 115BBH came into effect on April 1, 2022 (Assessment Year 2023–24). It completely changed how crypto is taxed in India. Before this law, the tax treatment of crypto was ambiguous — some people were treating gains as capital gains, others as business income. Section 115BBH ended that ambiguity.
What does 30% tax mean in practice?
If you buy Bitcoin for ₹10 lakh and sell it for ₹15 lakh, your gross profit is ₹5 lakh. You pay 30% of ₹5 lakh = ₹1.5 lakh as tax. Add 4% health and education cess, and your effective rate is 31.2%.
This rate applies regardless of:
- Your income tax bracket (even if you're in the 5% or 20% slab)
- How long you held the asset (no distinction between short-term and long-term)
- The type of VDA — Bitcoin, NFTs, and altcoins are all treated the same
What deductions are allowed?
Only the cost of acquisition (your buy price) can be deducted. Everything else — transfer fees, gas fees, platform commissions, internet costs — cannot be deducted. This is much stricter than the treatment of shares or mutual funds.
Section 194S: The 1% TDS on Every Sale
Section 194S was introduced alongside Section 115BBH. It requires a 1% Tax Deducted at Source (TDS) on the consideration paid for any transfer of a VDA.
How TDS works on crypto exchanges
When you sell ₹1,00,000 worth of Ethereum on an Indian exchange like CoinDCX or WazirX, the exchange deducts ₹1,000 (1%) before crediting your account. This ₹1,000 goes directly to the government as an advance tax collection mechanism.
Key points about Section 194S TDS:
- TDS applies on the total sell value, not just the profit
- Applicable when annual transactions exceed ₹50,000 (₹10,000 for some categories)
- Indian exchanges deduct TDS automatically — you don't have to do anything
- The TDS you've paid can be claimed as credit when filing your ITR, reducing your final tax liability
- For P2P or off-exchange transactions, the buyer is responsible for deducting TDS
Complete Tax Calculation Example
Let's walk through a real-world calculation for someone trading Bitcoin in FY 2024–25:
| Parameter | Value |
|---|---|
| Buy price (per BTC) | ₹20,00,000 |
| Sell price (per BTC) | ₹30,00,000 |
| Quantity | 1 BTC |
| Total buy value | ₹20,00,000 |
| Total sell value | ₹30,00,000 |
| Gross profit | ₹10,00,000 |
| Tax owed (30% of profit) | ₹3,00,000 |
| TDS deducted (1% of sell value) | ₹30,000 |
| Final take-home | ₹6,70,000 |
Out of ₹10 lakh profit, you keep ₹6.70 lakh. The government takes ₹3.30 lakh (₹3 lakh tax + ₹30,000 TDS). Note that the TDS of ₹30,000 is credited against your ₹3 lakh tax liability, so your net additional tax payment at ITR time is ₹2,70,000.
What happens if you make a loss?
If your sell price is lower than your buy price, you have a crypto loss. Under Section 115BBH, no tax is owed on losses. However, this loss cannot be used to offset gains from other sources. The 1% TDS still applies on the sell value even in a loss scenario, though you can claim TDS credit in your ITR.
Do I need to report crypto in my ITR?
Yes. All VDA transactions must be reported in your Income Tax Return. Since FY 2022–23, Schedule VDA has been added to ITR-2 and ITR-3 forms specifically for this purpose. You need to report:
- Date of acquisition and sale for each transaction
- Cost of acquisition (buy price)
- Sale consideration (sell price)
- Net gain or loss from each transaction
Indian crypto exchanges are required to report transaction data to the Income Tax Department under Form 26AS and AIS (Annual Information Statement). This means the tax authorities already know about your trades, even if you don't report them.
Tips for Indian Crypto Investors in 2025
- Keep detailed records of every buy and sell transaction with dates, amounts, and prices
- Download your exchange reports — most Indian exchanges provide tax reports for the financial year
- Don't assume losses cancel out gains — they don't under current Indian law
- Check your Form 26AS to see TDS credits already recorded against your PAN
- File your ITR on time to avoid penalties and interest under Sections 234B and 234C
- Consult a CA for complex situations — staking rewards, airdrops, and DeFi transactions have additional nuances
Frequently asked questions
Is crypto legal in India?
Yes. While the Reserve Bank of India (RBI) has expressed concerns about private cryptocurrencies, trading them is not illegal. The government has chosen to regulate crypto through taxation rather than a ban.
What about staking rewards and airdrops?
Staking rewards and airdrops are generally considered income at the time of receipt (valued at the fair market value on the date of receipt) and are taxable. When you later sell these tokens, the gain is calculated from their value at the time of receipt.
Does the 30% tax apply to crypto bought before 2022?
Yes. The tax applies to the sale of any VDA on or after April 1, 2022, regardless of when the asset was purchased. If you bought Bitcoin in 2017 and sold it in 2024, the 30% rate applies to the profit.