Income Tax on Crypto & Virtual Digital Assets 2026: Complete Filing Guide | Taxquick
Quick Summary
- Crypto taxed at flat 30% plus 4% cess in India (Section 115BBH)
- 1% TDS on all crypto transfers above ₹10,000/year
- No loss set-off allowed — not even against other crypto
- Report in Schedule VDA using ITR-2 or ITR-3
If you traded cryptocurrency, NFTs, or any Virtual Digital Assets (VDAs) during FY 2025-26, you must report the income in your ITR and pay tax at a flat 30% rate under Section 115BBH. India’s crypto tax rules are strict — no deductions (except cost of acquisition), no loss set-off, and mandatory 1% TDS. This guide covers everything you need to know about filing crypto taxes in 2026.
Crypto Tax Rates in India FY 2025-26
| Component | Rate | Section |
|---|---|---|
| Tax on crypto gains | 30% (flat, regardless of income slab) | 115BBH |
| Surcharge | Based on total income slabs | — |
| Health & Education Cess | 4% on tax + surcharge | — |
| TDS on crypto transfer | 1% on consideration | 194S |
| Effective tax rate (no surcharge) | 31.2% | — |
What Counts as a Taxable Crypto Transaction?
| Transaction | Taxable? | Tax Treatment |
|---|---|---|
| Selling crypto for INR | Yes | 30% on profit (sale price – cost of acquisition) |
| Crypto-to-crypto swap | Yes | 30% on profit at fair market value |
| Using crypto to buy goods/services | Yes | 30% on gain at time of use |
| Receiving crypto as gift | Yes (if value above ₹50,000) | Taxed at 30% on full value when sold |
| Mining/staking rewards | Yes | Taxed as income; 30% on subsequent sale |
| Airdrop tokens | Yes | Taxed at 30% on fair market value when received |
| Buying crypto with INR | No (just acquisition) | Cost of acquisition recorded |
| Holding crypto (no sale) | No | Unrealized gains not taxed |
How to Calculate Crypto Tax: Example
| Particulars | Amount |
|---|---|
| Bought 1 BTC at | ₹25,00,000 |
| Sold 1 BTC at | ₹35,00,000 |
| Profit | ₹10,00,000 |
| Tax at 30% | ₹3,00,000 |
| Cess at 4% | ₹12,000 |
| Total Tax Payable | ₹3,12,000 |
Important: Only the cost of acquisition can be deducted. You cannot deduct trading fees, internet costs, or any other expense. If you made a loss on one crypto and profit on another, you cannot set off the loss against the profit.
Which ITR Form for Crypto Income?
| Situation | ITR Form | Schedule |
|---|---|---|
| Salaried + crypto trading | ITR-2 | Schedule VDA |
| Business income + crypto | ITR-3 | Schedule VDA |
| Only crypto income (no salary) | ITR-2 | Schedule VDA |
| Crypto mining as business | ITR-3 | Schedule VDA + business income |
TDS on Crypto: Section 194S
From July 1, 2022, a 1% TDS is deducted on all crypto transfers above ₹10,000 per year (₹50,000 for specified persons). Most Indian exchanges (WazirX, CoinDCX, CoinSwitch) deduct TDS automatically. If you trade on foreign exchanges or P2P, you must pay the TDS yourself using Form 26QE. This TDS is reflected in your Form 26AS and can be claimed as a credit when filing ITR.
Common Mistakes in Crypto Tax Filing
| Mistake | Consequence | How to Avoid |
|---|---|---|
| Not reporting crypto gains | Notice under Section 148 + penalty | AIS now tracks exchange data; always report |
| Setting off crypto losses against other income | Disallowed; revised demand | Crypto losses cannot be set off anywhere |
| Using wrong ITR form (ITR-1) | Return defective; needs revision | Use ITR-2 or ITR-3 with Schedule VDA |
| Not reporting crypto-to-crypto swaps | Considered tax evasion | Every swap is a taxable event |
| Claiming expenses beyond cost of acquisition | Disallowed by Section 115BBH | Only deduct purchase price |
Frequently Asked Questions
Is crypto legal in India?
Crypto is not illegal in India, but it is not recognized as legal tender either. The government taxes crypto gains under Section 115BBH. You can legally buy, sell, and hold crypto, but must report all transactions and pay applicable taxes.
Can I set off crypto losses against crypto profits?
No. Under Section 115BBH, losses from one VDA cannot be set off against gains from another VDA or any other income. Each profitable transaction is taxed independently at 30%. Losses cannot be carried forward either.
How does TDS work on crypto exchanges?
Indian exchanges automatically deduct 1% TDS under Section 194S on every sale/transfer. This TDS appears in your Form 26AS and is credited against your final tax liability when you file ITR. If you trade on foreign exchanges, you must self-report and pay TDS.
Do I need to report crypto holdings even if I didn’t sell?
Simply holding crypto without selling does not create a tax event. However, if your crypto appears in AIS (Annual Information Statement), it’s good practice to be aware of it. You only need to report and pay tax when you sell, swap, or use crypto for purchases.
Can Taxquick help with crypto tax filing?
Yes! Taxquick handles crypto ITR filing including computation of gains from multiple exchanges, Schedule VDA preparation, TDS reconciliation, and compliance with Section 115BBH. We ensure accurate reporting of all VDA transactions.
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