Crypto tax in India: how the 30% tax and 1% TDS actually work

Crypto is taxed in India under a set of rules (Section 115BBH, in force since FY 2022-23) that are deliberately stricter than almost any other asset. If you've sold any Virtual Digital Asset — Bitcoin, Ethereum, any coin or token — knowing these rules before you file saves you both money and a notice. Here's the whole picture in plain English.

A flat 30% — no matter how long you held

Gains from transferring crypto are taxed at a flat 30%, plus a 4% health & education cess, for an effective 31.2%. There's no lower rate for holding longer: unlike shares or property, crypto has no short-term/long-term distinction. Whether you held for a day or three years, the gain is taxed the same way. The rate is also fixed regardless of your income slab — even if your other income is in the 5% bracket, your crypto gain is taxed at 30%.

The only deduction is what you paid for it

Against your sale value you can subtract just one thing: the cost of acquisition (what you originally paid for the coin). You cannot deduct exchange fees, gas/transaction costs, internet, or any other expense, and there's no indexation for inflation. So if you bought ₹1,00,000 of a coin and sold it for ₹1,50,000, the taxable gain is the full ₹50,000 — fees you paid along the way don't reduce it.

The trap that catches everyone: losses give you nothing

This is the harshest part of the rule. A loss on one crypto cannot be set off against a gain on another crypto. It cannot be set off against any other income — not salary, not capital gains on shares. And it cannot be carried forward to future years. So imagine two trades in a year: one coin gains ₹50,000, another loses ₹50,000. Economically you broke even — but you're still taxed on the full ₹50,000 gain (about ₹15,600), and the ₹50,000 loss simply disappears. Each gain is taxed on its own.

The separate 1% TDS (Section 194S)

On top of the 30% tax, a 1% TDS (Tax Deducted at Source) is taken on the sale value of crypto when it crosses a small threshold — ₹10,000 in a year for most people (₹50,000 for specified persons). Indian exchanges deduct it automatically at the time of sale. It's important to understand this is not an extra tax: it's an advance that's adjusted against your final 30% liability when you file. But it does lock up 1% of every sale's value through the year, which adds up for active traders.

A worked example

Say you bought ₹2,00,000 of Bitcoin and later sold it for ₹3,00,000. Your gain is ₹1,00,000. Tax at 30% is ₹30,000, plus 4% cess (₹1,200) = ₹31,200 total. You keep ₹68,800. Separately, 1% TDS of ₹3,000 was deducted on the ₹3,00,000 sale value at the time of the trade — and you'll adjust that ₹3,000 against the ₹31,200 when you file, so it isn't lost. Want your own numbers instead of this example?

How to report crypto in your ITR

Crypto gains are reported in a dedicated Schedule VDA in the income-tax return. Because you'll have capital-gains-style income, salaried filers with crypto generally use ITR-2 (or ITR-3 if you trade as a business). Reconcile every sale with the TDS already deducted (visible in your AIS and Form 26AS) so the 1% credit is correctly adjusted. Keep your exchange statements — date, buy value, sell value — for each trade.

Common mistakes that cost money

• Assuming losses offset gains — they don't, so don't sell a loser expecting it to cut your tax bill.
• Forgetting the TDS credit — the 1% already deducted is yours to adjust; missing it means overpaying.
• Treating crypto like shares — there's no 12-month long-term rate and no ₹1.25 lakh exemption; that's only for listed equity.
• Not reporting at all — exchanges report your TDS to the department, so the trade is already visible in your AIS.

Crypto's tax treatment won't get friendlier soon, so the smart move is to know the number before you sell, not after. Run your buy and sell value through the calculator and you'll see exactly what you keep.