Crypto tax in India: 30% flat, no set-off, and the 1% TDS you forgot about
India taxes crypto gains at 30% with no deductions except the cost of acquisition. Losses cannot be set off against anything. And every sale — even at a loss — triggers 1% TDS. The maths, plainly.
Since the 2022 Budget, India has had one of the clearest — and harshest — crypto tax regimes in the world. The rules are simple to state and painful to live with.
The three rules
1. 30% flat tax on gains. Any profit from the sale, exchange, or transfer of a Virtual Digital Asset (VDA) — which includes Bitcoin, Ethereum, NFTs, and any other crypto — is taxed at 30% plus 4% cess (effective 31.2%). No slab benefit. No basic exemption. A ₹100 gain is taxed the same whether your income is ₹3 lakh or ₹30 lakh.
2. No set-off, no carry-forward. If you make ₹1 lakh on Bitcoin and lose ₹80,000 on an altcoin, you pay 30% on ₹1 lakh. The ₹80,000 loss does not reduce the tax. It cannot be set off against crypto gains, equity gains, salary, business income, or anything else. It simply vanishes.
This is unlike equity, where short-term losses offset short-term gains and long-term losses offset long-term gains. For crypto, every winning trade is taxed as if the losing trades never happened.
3. 1% TDS on every transaction above ₹10,000. Under Section 194S, any person paying for a VDA must deduct 1% of the total transaction value (not just the gain) and deposit it with the government. If you sell ₹5,00,000 of Bitcoin — even at a loss — ₹5,000 is deducted as TDS.
The TDS is adjustable against your final tax liability, but the cash flow impact is immediate: 1% of every sale is locked up until you file your return and get the refund (if you are owed one).
What counts as a taxable event
- Selling crypto for INR. Gain = sale price minus cost of acquisition. Taxed at 30%.
- Swapping one crypto for another. Treated as a sale of the first and a purchase of the second. Gain on the first is taxable immediately, even if no money entered your bank account.
- Paying for goods or services with crypto. The fair market value at the time of payment minus the cost of acquisition is the gain.
- Receiving crypto as a gift. If the fair market value exceeds ₹50,000, it is taxable as income in the hands of the receiver.
- Airdrop or fork. Received tokens are income at fair market value on the date of receipt.
- Mining or staking rewards. Taxable as income at the time of receipt, and again at 30% if sold at a profit later.
Practically, every movement of crypto that is not a purchase is a potential taxable event.
The cost of acquisition problem
The only deduction allowed against the sale price is the cost of acquisition — what you paid for the crypto. No deduction for transaction fees, gas fees, wallet charges, or platform commissions. No deduction for electricity if you mined it.
This creates odd outcomes:
- Buy 1 ETH at ₹2,00,000. Sell at ₹2,50,000. Pay ₹2,000 in gas fees and ₹500 in platform fees. Gain is ₹2,50,000 − ₹2,00,000 = ₹50,000. Tax is ₹15,000. The ₹2,500 in fees is not deductible.
- Buy 1 BTC at ₹40,00,000. Sell at ₹40,50,000. Apparent gain: ₹50,000. Tax: ₹15,000. If the actual profit after fees is ₹45,000, the tax exceeds the net gain by ₹1,500.
Reporting it on the ITR
Crypto income is reported under "Schedule VDA" in the Income Tax Return. You must disclose:
- Date of acquisition and sale
- Cost of acquisition
- Sale consideration
- Whether the gain is a transfer, exchange, gift, or other
Most crypto exchanges — WazirX, CoinDCX, CoinSwitch — provide a tax report that maps to this schedule. If you traded across multiple platforms or used decentralised exchanges, the reporting burden is on you.
Not reporting is not a viable strategy. Exchanges report all transactions to the department. Your AIS (Annual Information Statement) already shows your crypto trades, and the department's matching algorithms will flag unreported income.
Planning within the rules
The tax is harsh, but some strategies reduce the pain:
1. Harvest gains in low-return years. If you are planning to exit, do it during a year when the absolute gain is smaller. 30% of ₹1 lakh is ₹30,000; 30% of ₹5 lakh is ₹1,50,000. Time your exits, if possible, to avoid large single-year gains.
2. Track cost basis meticulously. Since cost of acquisition is the only deduction, getting it wrong means paying more tax than necessary. Use FIFO (First In, First Out) for determining which units are sold — and document it, because the department may ask.
3. Avoid unnecessary swaps. Every crypto-to-crypto swap is a taxable event. If you are rebalancing, consolidate into one swap rather than five, and time it when unrealised gains are low.
4. Keep the TDS credit. File your return on time and claim the 1% TDS paid on every transaction. If you had a net loss year, the TDS refund is the only money coming back.
What the capital gains calculator shows
Enter a crypto purchase and sale to see the 30% flat tax. Then compare it to equity, where the first ₹1.25 lakh of LTCG is exempt and the rate is 12.5% — the contrast illustrates why crypto and equity are taxed in entirely different universes in India.
Open the capital gains calculator
Published by FinClamp. This guide is information, not financial advice — see the disclaimer.