India's 30% flat tax on cryptocurrency gains has been in force since FY 2022-23, introduced through Section 115BBH of the Income Tax Act. Three years later, many crypto investors still misunderstand how it works - leading to incorrect ITR filing, missed TDS credits, and unexpected notices. This article breaks it down completely.
Where Does the 30% Rule Come From?
Section 115BBH was inserted into the Income Tax Act, 1961 by the Finance Act 2022. It states that income from the transfer of any Virtual Digital Asset (VDA) shall be taxed at a flat rate of 30%. This rate was confirmed unchanged in Budget 2025 and Budget 2026.
The Effective Tax Rate is Higher Than 30%
- 4% Health and Education Cess is levied on the tax - making the minimum effective rate 31.2%
- Surcharge applies if total income (including crypto) exceeds Rs 50 lakh
| Total Income | Approximate Effective Rate on Crypto Gains |
|---|---|
| Below Rs 50 lakh | 31.2% (30% + 4% cess) |
| Rs 50 lakh - Rs 1 crore | 34.32% (30% + 10% surcharge + cess) |
| Rs 1 crore - Rs 2 crore | 35.88% (30% + 15% surcharge + cess) |
| Rs 2 crore - Rs 5 crore | ~39% (30% + 25% surcharge + cess) |
| Above Rs 5 crore | ~42.74% (30% + 37% surcharge + cess) |
Which Transactions Trigger 30% Tax?
Any transfer of a VDA triggers the 30% tax. Transfer includes selling crypto for rupees, swapping one crypto for another (BTC to ETH is a taxable event), and spending crypto to buy goods or services.
What does NOT directly trigger 30% tax: staking rewards, airdrop receipts, and mining income - these are taxed at slab rates when received. When you later sell them, 30% applies to the profit.
Section 87A Rebate Does NOT Apply to Crypto Income
This catches many small crypto investors. Under Section 87A, taxpayers with income up to Rs 7 lakh (new regime) get a full tax rebate. However, this rebate does NOT apply to income taxed under Section 115BBH. Even if your total income is Rs 5 lakh and Rs 2 lakh of it is crypto gains, you pay 30% tax on the Rs 2 lakh crypto portion - no rebate.
How 1% TDS Works Under Section 194S
Every time you sell crypto on an Indian exchange, the exchange deducts 1% TDS from your sale proceeds. This 1% is not an additional tax - it is an advance payment against your 30% liability.
Example
| Item | Amount |
|---|---|
| Total crypto sold during FY 2025-26 | Rs 5,00,000 |
| Cost of acquisition | Rs 3,00,000 |
| Taxable profit under Section 115BBH | Rs 2,00,000 |
| 30% tax on profit + 4% cess | Rs 62,400 |
| 1% TDS already deducted by exchange | Rs 5,000 |
| Balance tax to pay as self-assessment | Rs 57,400 |
The TDS deducted is visible in AIS and Form 26AS. Always cross-check and claim it as a credit in your ITR.
No Deductions Except Cost of Acquisition
Section 115BBH explicitly bars ALL deductions except the cost of acquisition:
- Exchange fees and trading commissions - NOT deductible
- Gas fees and network charges - NOT deductible
- Advisory and CA fees for crypto - NOT deductible
- Interest paid on loan for crypto investment - NOT deductible
No Loss Set-Off or Carry Forward
If you lost money on one trade and made money on another - you cannot net them off. Each gain is taxed at 30%, each loss is ignored for tax purposes. You cannot set crypto losses against salary, capital gains from stocks, or future years - no exceptions.
Crypto Taxation Is Not Going Away - File Correctly
With AIS, FIU-IND exchange reporting, and OECD CARF adoption planned for 2027, undisclosed crypto income is increasingly traceable. Filing correctly with Schedule VDA is essential. Regikart's CA team specialises in crypto ITR - from multi-exchange consolidation to accurate Schedule VDA and TDS reconciliation.
| Ready to File Your ITR for FY 2025-26? Let Regikart's expert CA team handle it - accurately, on time, and stress-free. File Your ITR with Regikart: https://regikart.com/income-tax-return-filing Call / WhatsApp: +91 945 945 6700 | Email: [email protected] |
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Disclaimer: This article is for informational purposes only and does not constitute professional tax advice. Tax laws may change. Please consult a qualified Chartered Accountant for advice specific to your situation.
About the author
Rohit
Senior Advisor at Regikart. Want to discuss this in the context of your business?
