Crypto is not a grey area in the Indian return any more. The tax rules are narrow, the reporting schedule is specific, and the department receives your exchange data whether or not you report it.
This post sets out the rules that make crypto different from shares, shows you what actually goes into each column of Schedule VDA, and tells you how to fix a year in which you left crypto out. If you would rather hand the whole return over, our crypto ITR filing service does exactly this.
The rules that make crypto different
| Rule | The position |
|---|---|
| Rate | A flat 30%, plus surcharge and cess, on income from the transfer of a virtual digital asset, under section 115BBH. It does not depend on your slab or on how long you held the asset |
| Deductions | Only the cost of acquisition. Nothing else |
| Loss set-off | None. A loss on one VDA cannot reduce a gain on another VDA, or salary, or share gains, or any other income |
| Loss carry-forward | None. A VDA loss cannot be carried to a later year |
| TDS | 1% on the payment, under section 194S, deducted on the value and not on the gain |
| Reporting | Schedule VDA, transfer by transfer, in ITR-2 or ITR-3 |
| Rebate | The new-regime rebate does not cover income taxed at special rates, so 30% applies to your crypto gains even if your other income is small |
Section 115BBH was inserted into the Income-tax Act, 1961 by the Finance Act, 2022. The 30% is charged before surcharge; with the 4% health and education cess on top, the lowest effective rate on a crypto gain is 31.2%, and surcharge adds to that where total income is high enough. This is a different regime from the one that taxes your shares and mutual funds, which is covered in our guide to capital gains tax in India.
The "no deductions" rule is broader than people expect. Exchange fees and trading commissions, gas and network charges, advisory or accounting fees paid for your crypto work, and interest on money borrowed to buy crypto are all outside it. Only what you paid for the asset itself comes off.
The "no set-off" rule is the one that produces the surprising number. Each gain is taxed at 30% and each loss is ignored. It is not just that crypto losses cannot shelter your salary. A loss on Ether cannot reduce a gain on Bitcoin either.
The rebate rule catches small investors. If your total income is ₹5 lakh and ₹2 lakh of it is crypto gains, the rebate can wipe out the tax on the other ₹3 lakh, but you still pay 30% on the ₹2 lakh of crypto.
A worked example
Illustrative figures for a resident individual trading on an Indian exchange in FY 2025-26.
| Transaction | Cost of acquisition | Sale value | Result |
|---|---|---|---|
| Bitcoin, sold for rupees | ₹2,00,000 | ₹3,00,000 | Gain ₹1,00,000 |
| Ether, sold for rupees | ₹1,50,000 | ₹1,00,000 | Loss ₹50,000, ignored |
| Exchange fees on both trades | ₹2,000 | Not deductible |
Taxable VDA income is ₹1,00,000, not ₹50,000, because the Ether loss cannot be set off. Tax is ₹30,000 plus cess, and surcharge where total income is high enough.
The exchange would have deducted 1% TDS on both sale values: ₹3,000 and ₹1,000. That ₹4,000 is credited against the ₹30,000 in the return, and the balance is paid as self-assessment tax before you file. If your TDS exceeds your tax, because most of your trades were at a loss, the excess is refundable, but only if you file.
What counts as a virtual digital asset
A VDA is, in broad terms, any information, code, number or token generated through cryptographic means, including a crypto-asset: a digital representation of value that relies on a cryptographically secured distributed ledger. The definition is in section 2(47A).
Bitcoin, Ether, other tokens, stablecoins and NFTs fall inside it. Indian rupees and foreign currency do not. The rules apply the same way whether you bought on an Indian exchange, a foreign exchange or a self-custody wallet.
Which transactions are taxable
A transfer is not only a sale for rupees. Section 115BBH(3) applies the ordinary meaning of "transfer" whether or not the VDA is a capital asset, and an exchange of one asset for another is a transfer.
| What you did | Is it a transfer? |
|---|---|
| Sold crypto for rupees | Yes. Gain is sale consideration minus cost of acquisition |
| Swapped one token for another | Yes. You transferred the token you gave up |
| Spent crypto on goods or services | Yes, on the token you spent |
| Moved crypto between your own wallets | No. Nothing was transferred to anyone |
| Held crypto without selling | No. Nothing arises until you transfer |
| Received crypto as a gift | Not a transfer by you, but see the gift rule below |
Each transfer is computed separately, which is why an active trader can have thousands of lines and why a spreadsheet built from exchange exports is the only sane way to do this.
Gifts
A VDA is "property" for the gift rules in section 56(2)(x). If the total value of gifts you receive in a year from people who are not relatives exceeds ₹50,000, it is taxed as your income under other sources. Gifts from relatives, such as a spouse, parent or sibling, are outside the rule.
Schedule VDA carries specific instructions for the cost of acquisition of an asset you received as a gift.
Airdrops, staking and mining
These raise two questions the Act does not answer as clearly as it answers sales: when the income arises, and what the cost is on a later sale. There is no official guidance settling the position on receipt. What is settled is that the 30% under section 115BBH applies when you later transfer the token.
We will not state a rule here that we cannot source. The honest position is that the treatment is taken case by case, and any CA filing your return should tell you in writing what position they are taking before they file it, so that the reasoning is on record if the year is ever reopened.
The 1% TDS, and how you get credit for it
When you sell or swap a VDA, the buyer or the exchange deducts 1% TDS on the value of the consideration under section 194S, for payments to a resident. It is deducted on the value, not on the gain, so it comes off even on a losing trade.
There are nil thresholds. No TDS applies where payments in the year do not exceed:
- ₹50,000, where the payer is a specified person, broadly an individual or HUF without a business audit requirement; or
- ₹10,000, for any other payer.
On Indian exchanges the exchange usually deducts and deposits the TDS. It then shows against your PAN in Form 26AS and the AIS, and in the return it is credited against your total tax. The 1% is an advance payment against your 30% liability, not an additional tax.
The form names changed on 1 April 2026
From 1 April 2026, TDS on VDA transfers falls under section 393(1) of the Income-tax Act, 2025, and the forms changed with it.
| Purpose | Until 31 March 2026 | From 1 April 2026 |
|---|---|---|
| Challan-cum-statement for VDA TDS | Form 26QE | Form 141 |
| Quarterly statement of VDA TDS | Form 26QF | Form 142 |
Your FY 2025-26 return still relates to the old forms, because the year does. If you are a buyer who deducts VDA TDS yourself, from 1 April 2026 you file Form 141 and Form 142: our TDS return filing team handles both.
Schedule VDA, column by column
Every VDA transfer is reported in Schedule VDA, "Income from transfer of Virtual Digital Assets". It appears in ITR-2 and ITR-3 for individuals, and in ITR-5, ITR-6 and ITR-7 for other persons. It is not in ITR-1 or ITR-4, so crypto income rules out the simpler forms. Filing ITR-1 with crypto income produces a defective return notice under section 139(9).
| Column | What goes in it |
|---|---|
| Date of acquisition | When you bought or received the asset |
| Date of transfer | When you sold, swapped or spent it |
| Head of income | Capital gains, or business income if you trade as a business |
| Cost of acquisition | What you paid. Special instructions apply to an asset received as a gift |
| Consideration received | The sale value |
| Income from transfer | Consideration minus cost. A loss is reported as nil |
That last line is the one that trips people up. The schedule does not carry negative figures, because a VDA loss has nowhere to go. It is reported as nil, and it disappears.
How to work through it
- Download the full FY 2025-26 transaction history from every exchange you used, and list the addresses of any self-custody wallets.
- Build one consolidated ledger of every transfer, with the cost against each. No official method, FIFO or otherwise, has been prescribed for matching costs to lots, so document the method you use and apply it consistently across the year.
- Download Form 26AS and the AIS and match every TDS entry against a trade. A TDS entry with no matching trade in your ledger means a trade is missing.
- Start ITR-2 or ITR-3 on incometax.gov.in, indicate that you have VDA income, and complete Schedule VDA transfer by transfer.
- Put any gift taxed under section 56(2)(x) in income from other sources, not in Schedule VDA.
- Claim the TDS credit in the tax-paid schedules, pay the balance as self-assessment tax through e-Pay Tax, then file and e-verify within 30 days.
ITR-2 or ITR-3? ITR-2 where crypto is an investment and you have no business income. ITR-3 where you trade crypto as a business, or have other business income (see our business ITR filing page). The rate is 30% either way, but the head you choose has to be consistent with how you actually deal.
For the return itself, our crypto tax filing service handles multi-exchange consolidation from ₹1,999.
Crypto held outside India
If you are resident and ordinarily resident, Schedule FA asks for foreign assets, including custodial accounts and "any other capital asset" held outside India. The schedule does not name crypto.
Whether a balance on a foreign exchange belongs in Schedule FA depends on how the account is held, and that is a judgment to make on your actual account before you file, not from a rule of thumb. If you are a non-resident, Schedule FA does not apply: see our NRI income tax return service.
What the department already knows
Two data flows reach the department without you.
TDS data from exchanges, which is why crypto trades appear in your Form 26AS and AIS whether or not they appear in your return.
Crypto-asset reporting from 1 April 2026, under section 285BAA, inserted by the Finance Act, 2025. Exchanges and other reporting entities report crypto-asset transactions to the department, so an AIS entry with no Schedule VDA behind it is visible.
The CBDT has written to taxpayers whose exchange data showed VDA transactions that were not reported in their returns. If an email, a mismatch intimation or a notice reaches you about crypto, reply within the time the communication allows. Our income tax notice reply service handles these.
Left crypto out? The route depends on the year
On 25 September 2026 the non-audit dates for FY 2025-26 have passed: 31 July 2026 for investors with no business income, 31 August 2026 for anyone trading crypto as a business without an audit requirement. Audit cases are due 31 October 2026. The full list is in our post on ITR due dates for AY 2026-27.
| Situation | Route | Deadline |
|---|---|---|
| FY 2025-26, not filed at all | Belated return, section 139(4) | 31 December 2026 |
| FY 2025-26, filed without the crypto | Revised return, section 139(5) | 31 March 2027 |
| An earlier year, or both dates above gone | Updated return, ITR-U, section 139(8A) | 48 months from the end of that assessment year |
A belated return carries a late fee of ₹1,000 where total income is up to ₹5 lakh and ₹5,000 above that, under section 234F, plus interest at 1% a month on unpaid tax under section 234A.
An ITR-U carries additional tax of 25% to 70% of the tax and interest under section 140B, depending on how late it is, and it cannot report a loss or increase a refund. On 25 September 2026 the open years for an ITR-U are AY 2022-23 through AY 2025-26: the bands and closing dates are in our ITR-U rules post, and the three routes are compared in our guide to belated, revised and updated returns.
Correcting a year voluntarily costs less than answering a notice about it. Our income tax return filing team handles belated, revised and updated returns.
Which Act applies
FY 2025-26 crypto income is taxed and reported under the Income-tax Act, 1961. The Income-tax Act, 2025 came into force on 1 April 2026 and governs Tax Year 2026-27 onwards.
| Point | FY 2025-26 (AY 2026-27) | Tax Year 2026-27 |
|---|---|---|
| Law | Income-tax Act, 1961 | Income-tax Act, 2025 |
| Tax on VDA income | Section 115BBH, 30% | Special-rate taxation of VDA income continues |
| TDS on transfer | Section 194S, 1% | Section 393(1) |
| TDS forms | Form 26QE, Form 26QF | Form 141, Form 142 |
| Return | ITR-2 or ITR-3 with Schedule VDA | New forms, to be notified |
Keep full records of every trade from 1 April 2026 onwards. The new forms are not out yet, and reconstructing a year of trades after the fact is the single most expensive part of a crypto return.
The mistakes that cost the most
- Treating crypto as a capital asset with a concessional long-term rate. It is 30% regardless of holding period, never the 12.5% LTCG rate.
- Netting a loss on one coin against a gain on another. Not permitted. It is the reason people compute a tax bill that looks wrong and is right.
- Deducting exchange fees or gas charges. Only cost of acquisition comes off.
- Filing ITR-1 or ITR-4 with crypto income. Schedule VDA is not in those forms, and the return comes back defective under section 139(9).
- Ignoring wallet-to-wallet movements when reconciling. They are not transfers, but they will look like unexplained gaps in your ledger if you do not label them.
- Assuming the rebate saves you. The new-regime rebate does not cover income taxed at special rates.
- Not claiming the TDS credit. It is already deducted. Not filing means not getting it back.
What to do next
If your FY 2025-26 return is not filed, the date is 31 December 2026. If you filed it without your crypto, you have until 31 March 2027 to revise. If the year is older than that, the question is which ITR-U band it sits in today.
Regikart is a CA and CS firm serving 250+ clients from Kolkata (head office), Delhi and Bengaluru. Every crypto return we file is prepared and reviewed by a Chartered Accountant: we consolidate your exchange and wallet exports, match every TDS entry to a trade, and complete Schedule VDA line by line through our crypto ITR filing service. Call or WhatsApp +91 70444 94804, or contact us.
Frequently asked questions
How is crypto taxed in India for FY 2025-26?
Income from transferring a virtual digital asset is taxed at a flat 30% plus surcharge and cess under section 115BBH. The rate does not depend on your slab or on how long you held the asset. Only the cost of acquisition is deductible, and losses cannot be set off against any income or carried forward.
Can I set off a crypto loss against a crypto gain?
No. Section 115BBH bars set-off of a VDA loss against income computed under any provision, which includes gains on other virtual digital assets. A loss on Ether cannot reduce a gain on Bitcoin, and neither can reduce your salary or your share gains. The loss cannot be carried forward either.
What is Schedule VDA?
Schedule VDA, "Income from transfer of Virtual Digital Assets", is the schedule in which every VDA transfer is reported transfer by transfer: date of acquisition, date of transfer, head of income, cost of acquisition, consideration received and the resulting income. A loss is reported as nil. It appears in ITR-2 and ITR-3 for individuals, and not in ITR-1 or ITR-4.
Which ITR form do I use for crypto?
ITR-2 if crypto is an investment and you have no business income, or ITR-3 if you trade crypto as a business or have other business income. ITR-1 and ITR-4 do not contain Schedule VDA, so using either with crypto income produces a defective return notice under section 139(9). The rate is 30% in both forms.
Are exchange fees and gas charges deductible?
No. Section 115BBH permits only the cost of acquisition. Exchange fees, trading commissions, gas and network charges, advisory or accounting fees for your crypto work, and interest on money borrowed to buy crypto are all non-deductible. Only what you paid for the asset itself reduces the gain.
Is a crypto-to-crypto swap taxable?
Yes. A transfer includes an exchange, so swapping one token for another is a transfer of the token you gave up, and the gain on that token is taxed at 30%. Spending crypto on goods or services is the same. Moving crypto between your own wallets is not a transfer.
How does the 1% TDS under section 194S work?
The buyer or exchange deducts 1% of the payment when you sell or swap a VDA, on the value rather than the gain, so it is deducted even on a losing trade. No TDS applies where payments in the year do not exceed ₹50,000 for a specified person or ₹10,000 for other payers. It appears in Form 26AS and the AIS and is credited against your 30% liability.
Can I get the 1% TDS back if I made a loss?
Yes, but only by filing. The TDS is credited against your total tax, and where it exceeds your liability the excess is refundable like any other excess TDS. Someone who traded at a loss all year has TDS sitting against their PAN and no tax to set it against, which is refund money that goes unclaimed if no return is filed.
Does the section 87A rebate apply to crypto income?
No. The new-regime rebate does not cover income taxed at special rates, and section 115BBH is a special rate. So crypto gains are taxed at 30% even where your other income is small enough that the rebate wipes out the tax on it. This surprises small investors more than any other rule on this page.
Is a crypto gift taxable?
A VDA is "property" for section 56(2)(x), so if the total value of gifts you receive in a year from people who are not relatives exceeds ₹50,000, it is taxed as your income under other sources. Gifts from relatives such as a spouse, parent or sibling are outside the rule. The gift goes in other sources, not in Schedule VDA.
How do I report crypto held on a foreign exchange?
Schedule FA asks a resident and ordinarily resident taxpayer for foreign assets, including custodial accounts and any other capital asset held outside India, and it does not name crypto specifically. Whether a foreign exchange balance belongs there depends on how the account is held, which is worth settling with a CA on your actual account rather than on a rule of thumb.
What if I left crypto out of an earlier return?
For FY 2025-26, file a belated return by 31 December 2026 if you never filed, or revise by 31 March 2027 if you filed without it. For an earlier year, an updated return under section 139(8A) is available within 48 months of the end of that assessment year, with additional tax of 25% to 70% of the tax and interest, and it cannot report a loss or increase a refund.
Crypto ka tax bachane ka koi tarika hai?
Legal deductions ke naam par kuch nahi hai: section 115BBH sirf cost of acquisition allow karta hai, aur loss set-off ya carry-forward bilkul nahi hota. Jo cheez aap kar sakte hain woh hai sahi reporting: har transfer Schedule VDA mein, 1% TDS ka credit claim karna, aur koi refund due ho to return file karke lena. Exchange ka data department ke paas pehle se hai.
About the author
CA Deepak Jaiswal
Founding Partner, FCA at Regikart. Want to discuss this in the context of your business?
