Crypto Tax India 2026: 30% Flat Tax, 1% TDS & ITR Filing — Complete Guide
Decode India's crypto tax regime for FY 2025-26: 30% flat tax, 1% TDS, Schedule VDA, ITR-2 vs ITR-3, no loss set-off, and 11 mistakes that get you a notice.
If you traded, sold, swapped, gifted, or earned a single rupee of crypto in India during FY 2025-26, the Income Tax Department has a precise framework you must follow. The rules look simple on paper — 30% flat tax on gains, 1% TDS on transfers — but the moment you go beyond a single buy-and-sell trade, the edge cases pile up fast.
This guide walks you through every line of crypto tax law that applies to a retail Indian trader, what to enter where in your ITR, the 11 mistakes that trigger notices, and the timing tricks that save tens of thousands of rupees.
The 30% flat tax — what it actually covers
Section 115BBH of the Income Tax Act treats every Virtual Digital Asset (VDA) transaction with realised gains as taxable at a flat 30% rate, plus 4% health and education cess (effective rate 31.2%), plus surcharge if your total income crosses the slabs.
Crucially, this rate applies regardless of:
- Your income tax slab (a 5% slab earner pays the same 30% on crypto gains)
- Holding period (no LTCG / STCG distinction for crypto, unlike equity)
- Whether you traded on an Indian exchange, a foreign exchange, a DEX, or peer-to-peer
- Whether you converted to INR or just swapped between two cryptocurrencies
The only deduction allowed is your cost of acquisition. Brokerage, gas fees, and transaction charges are not deductible. This is the single biggest deviation from how stocks or mutual funds are taxed.
What counts as a VDA transfer
The Finance Act defines "transfer" expansively. Each of these triggers a taxable event:
- Selling crypto for INR
- Selling crypto for USDT or any other crypto (yes, swaps are taxable)
- Spending crypto to buy goods or services
- Gifting crypto (recipient pays tax based on fair market value if from a non-relative)
- Receiving crypto as airdrops, mining rewards, staking rewards, or play-to-earn income
- Converting NFTs to crypto or fiat
Simply holding crypto, transferring between your own wallets, or receiving crypto as a gift from a "relative" (as defined in Section 56) are not taxable events.
The 1% TDS — a separate beast
From 1 July 2022, Section 194S mandates a 1% TDS on every VDA transfer where the consideration exceeds Rs 50,000 in a financial year (Rs 10,000 for "specified persons" — non-business individuals).