/ Blog · Crypto VDA Tax · Updated 2026-10-09
Crypto VDA tax India 2026, the complete framework.
India's Virtual Digital Asset (VDA) tax framework introduced by Finance Act 2022 continues in 2026: 30% flat tax on VDA gains under Section 115BBH, 1% TDS at source under Section 194S, no loss set-off against other heads, no indexation, no deductions beyond cost of acquisition. This is the practitioner's map for Indian crypto investors, traders, NFT buyers, and anyone receiving VDA as compensation.
Written by CA Durgesh Chavda
Chartered Accountant (ICAI) · Founder, Bharat Quantum Prospera · US incorporation, India-US DTAA, FEMA ODI, NRI taxation, cross-border structuring · LinkedIn
/ What is a VDA under Indian tax law
The scope.
Section 2(47A) defines Virtual Digital Asset:
- Any information, code, number, or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise,
- Providing a digital representation of value exchanged with or without consideration,
- Includes NFTs (non-fungible tokens) and specified categories.
Common VDAs:
- Cryptocurrencies: Bitcoin, Ethereum, Solana, USDT / USDC, altcoins, meme coins.
- NFTs: specified NFTs under CBDT Notification 75 of 2022 (digital-art, collectibles, specific utility tokens).
- Decentralised finance (DeFi) governance tokens.
NOT VDAs: gift cards, loyalty rewards, subscriptions, in-game items (unless specifically notified).
/ Section 115BBH: 30% flat tax on VDA gains
The core charge.
Rate: 30% flat rate (plus surcharge + 4% cess) on income from transfer of any VDA.
Taxable income: Sale consideration minus cost of acquisition. NO other deductions.
No set-off of loss: loss from VDA transfer CANNOT be set off against any other head of income (business, salary, capital gains from other assets). Can only be set off against VDA gain of the same year.
No carry-forward of VDA loss: unlike regular capital losses which can be carried forward 8 years, VDA losses cannot be carried forward. Loss expires in the year.
No indexation: cost of acquisition is nominal, not indexed. Holding period is irrelevant.
No special rate for long-term: all VDA gains are 30%, regardless of holding period.
Worked example — Indian resident buys BTC for INR 20 lakh in 2023, sells for INR 50 lakh in October 2026:
- Gain = INR 50 lakh - INR 20 lakh = INR 30 lakh
- Tax at 30% = INR 9 lakh (plus surcharge/cess based on total income)
- If total income > INR 2 crore (surcharge 25%): effective tax ~37.5% on VDA gain
- Compare to listed equity LTCG at 12.5% on same gain: INR 3.75 lakh. VDA framework is punitive.
/ Section 194S: 1% TDS on VDA transfers
The compliance mechanism.
Rate: 1% TDS on consideration paid for transfer of any VDA.
Deductor: the person paying (buyer in P2P; exchange in exchange-brokered trade).
Thresholds:
- INR 50,000 per FY aggregate if deductee's exchange / payer is a 'specified person' (small transactor).
- INR 10,000 per FY aggregate for all other cases.
Impact on exchanges: Indian crypto exchanges (CoinSwitch, CoinDCX, WazirX historically before pivot) must deduct 1% TDS on each VDA sale by Indian-resident customer. TDS deposited; Form 16A issued; reflected in customer's Form 26AS.
Impact on P2P transfers: Indian-resident buyer of VDA from another resident must deduct 1% TDS at the time of payment / credit. Compliance workload for individual P2P traders.
Foreign exchange withdrawal: if Indian resident uses foreign exchange (Binance via international account, Coinbase global), the foreign exchange does not deduct Indian TDS. The Indian resident is still responsible to compute and pay Section 115BBH tax on gains, but TDS is not withheld at source — higher audit risk.
/ Common questions in 2026
What matters.
Can I offset crypto losses against stock gains? No. VDA loss cannot be set off against capital gains from other assets.
Can I claim transaction fees as deduction? No. Only cost of acquisition. Exchange fees, gas fees, platform commission — all non-deductible under Section 115BBH.
What if I receive VDA as salary / payment for services? Receipt is taxed as salary / business income at slab rates at the FMV on date of receipt. The FMV becomes your cost basis. Subsequent transfer taxed under Section 115BBH at 30% on (sale consideration - cost basis / FMV at receipt).
What about airdrops / staking rewards? Taxable as income at FMV on receipt date. The FMV becomes cost basis. Subsequent transfer taxed at 30% on gain over that cost basis.
Does crypto held abroad need Schedule FA disclosure? Yes. For Resident and Ordinarily Resident taxpayers, foreign-held VDAs (on international exchange or foreign wallet) must be disclosed on Schedule FA. Non-disclosure attracts Black Money Act penalty up to INR 10 lakh per undisclosed asset.
Can an NRI escape India crypto tax? If the NRI is non-resident under Section 6 and VDA was held via foreign exchange (not Indian exchange), no India tax under Section 115BBH on the transfer (India taxes only India-source VDA transactions for NRIs under Section 115BBH). NRIs using Indian exchanges or Indian wallets are India-source and in scope.
What about GIFT City / IFSC exemption? Specific IFSC-regulated VDA activities may qualify for IFSC regime. Narrow carve-out; not applicable to retail trading.
Last updated: 2026-10-09.
/ Ready when you are
Crypto / VDA tax under Section 115BBH is punitive. Compliance isn't optional.
30% flat + 1% TDS + Schedule FA for foreign-held VDAs. Non-disclosure under Black Money Act compounds. BQP handles annual ITR with VDA schedule, 194S credit reconciliation, foreign asset disclosure. WhatsApp Durgesh.
FAQ
Common questions, answered.
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