Capital Gains on Crypto Transactions in India 2026
Introduction
Crypto investing and trading have become important tax-compliance areas in India, but Capital Gains on Crypto Transactions do not follow the same rules as gains from shares, gold, or property. Crypto assets generally fall within the definition of Virtual Digital Assets (VDAs), and income from their transfer is governed by a special tax regime.
Crypto Taxation in India 2026 requires investors and traders to understand the 30% VDA tax rate, 1% TDS, restricted deductions, loss set-off restrictions, crypto gifts, token-to-token transactions, and stronger transaction-reporting requirements.
Although the expression Capital Gains on Crypto Transactions is commonly used, the special VDA taxation provisions can apply even where the crypto asset is not treated as a capital asset.
How Are Crypto Transactions Taxed in India in 2026?
Income arising from the transfer of a VDA is generally taxable at 30%, along with applicable surcharge and health and education cess.
For Capital Gains on Crypto Transactions, the 30% rate does not automatically apply to the entire sale consideration. The special computation generally permits deduction of the cost of acquisition, if any, but restricts deduction of other expenditure or allowances.
The framework also provides that:
- VDA losses cannot be set off against income computed under other provisions.
- Such losses cannot be carried forward.
- TDS at 1% can apply to qualifying payments for transfer of a VDA to a resident.
- Crypto-asset reporting obligations have expanded from 2026.
These rules make crypto taxation significantly different from ordinary short-term and long-term capital gains applicable to traditional assets.
Are Crypto Profits Really Capital Gains?
Capital Gains on Crypto Transactions may arise where crypto assets are held as investments. However, depending on the facts, frequency, organisation, and nature of the activity, crypto income may also be characterised differently, including as business income.
The important point is that the special VDA taxation rule applies whether the VDA is a capital asset or not.
Therefore, Capital Gains on Crypto Transactions should not simply be taxed in the same manner as listed shares, property, or gold. The special VDA provisions determine the applicable tax rate, permissible deductions, and treatment of losses.
Crypto Taxation Under the 1961 Act vs Income tax Act, 2025
The core taxation of VDAs continues under the Income-tax Act, 2025, but the relevant section numbers have changed.
|
Rule |
Earlier / Transitional Provision |
Income-tax Act, 2025 |
|
30% VDA tax |
Section 115BBH | Section 194(1), Table Sl. No. 4 |
| 1% VDA TDS | Section 194S |
Section 393(1), Table Sl. No. 8(vi) |
|
Crypto-asset reporting |
Section 285BAA was introduced in the 1961 Act framework |
Section 509 is the operative provision from 1 April 2026 |
The Income-tax Act, 2025 came into force from 1 April 2026. Therefore, Crypto Taxation in India 2026 continues the special VDA taxation framework while using the corresponding provisions of the new Act for Tax Year 2026-27 onwards.
The crypto-asset reporting framework also became important from 2026, requiring prescribed reporting entities to furnish specified information relating to crypto-asset transactions.
30% Tax on Income From Crypto Transactions
For Capital Gains on Crypto Transactions, the 30% special rate applies to the income computed from the VDA transfer rather than automatically to the gross selling price.
For example:
- Sale value: ₹5,00,000
- Cost of acquisition: ₹3,00,000
- Taxable VDA income: ₹2,00,000
The 30% special rate applies to ₹2,00,000, along with applicable surcharge and cess.
The normal distinction between short-term and long-term capital-gain tax rates does not replace the special VDA rate merely because the crypto asset was held for a longer period.
What Can Be Deducted From Crypto Income?
The computation of Capital Gains on Crypto Transactions is restrictive.
The special VDA provisions generally permit deduction of the cost of acquisition, if any. However, other expenditure or allowances are not deductible under this special computation.
Therefore, expenses such as:
- Internet charges
- Trading-platform subscriptions
- Research tools
- Software subscriptions
- Other incidental trading expenses
Generally do not reduce taxable VDA income under the special rule.
Investors should therefore maintain clear transaction-level records showing the acquisition cost of every crypto asset.
Can Crypto Losses Be Set Off or Carried Forward?
One of the most important rules for Capital Gains on Crypto Transactions concerns losses.
A loss arising from transfer of a VDA cannot be set off against income computed under another provision, and such loss cannot be carried forward to a later tax year under the special VDA regime.
Consider this example:
- Bitcoin gain: ₹10 lakh
- Loss on another token: ₹8 lakh
- Economic net profit: ₹2 lakh
It would be incorrect to automatically assume that only ₹2 lakh is taxable.
The special VDA loss restrictions mean that Capital Gains on Crypto Transactions cannot simply be calculated by netting all profits and losses across the investor’s portfolio.
Similarly, crypto losses cannot be used to reduce gains from shares, property, or gold.
How Does 1% TDS on Crypto Transactions Work?
The 1% TDS rule is different from the final tax payable on Capital Gains on Crypto Transactions.
Under Section 393(1) of the Income-tax Act, 2025, TDS applies at 1% on consideration for transfer of a VDA to a resident.
However, the Act provides a no-deduction threshold of:
- ₹50,000 for specified individual or HUF payers
- ₹10,000 for other payers
Subject to the applicable statutory conditions.
The 1% TDS is only a tax-withholding mechanism. It is not the final VDA income tax.
This distinction is especially important for high-frequency traders because TDS may be deducted across several transactions even when the trader’s overall economic profit is comparatively small.
Where a person is independently responsible for deducting and reporting tax at source, proper TDS Return Filing may also be relevant depending on the transaction and applicable reporting mechanism.
Are Crypto-to-Crypto Swaps Taxable?
Capital Gains on Crypto Transactions are not limited to transactions where crypto is sold for Indian rupees.
A transaction such as:
- Bitcoin to USDT
- Ethereum to another token
- One VDA exchanged for another VDA
May still involve a taxable transfer.
The fact that no INR amount reaches the investor’s bank account does not, by itself, mean that no taxable transaction has occurred.
The VDA TDS framework also recognises transactions where consideration is wholly or partly in kind or in exchange for another VDA.
Therefore, every token-to-token swap should be reviewed separately.
How Are Crypto Gifts Taxed?
Crypto or another VDA received as a gift can also have income-tax consequences.
A VDA is included within specified movable property for the provisions dealing with property received without consideration or for inadequate consideration.
Where the statutory conditions are satisfied and the applicable threshold is crossed, the fair market value of the crypto received may become taxable in the recipient’s hands under Income from Other Sources.
The ₹50,000 threshold framework applies, subject to statutory exemptions.
For example, qualifying gifts received from specified relatives can be exempt.
When gifted crypto is subsequently sold or transferred, Capital Gains on Crypto Transactions or other applicable VDA income can arise. Maintaining records of the gift, valuation, and acquisition history is therefore important.
New Crypto-Asset Transaction Reporting in 2026
A major development under Crypto Taxation in India 2026 is stronger crypto-asset transaction reporting.
Section 509 of the Income-tax Act, 2025 provides for reporting of specified crypto-asset transactions by prescribed reporting entities.
The Income-tax Rules, 2026 also introduce detailed reporting and due-diligence requirements for relevant crypto-asset service providers.
The reporting framework applies to relevant calendar years beginning on or after 1 January 2026.
This is primarily an information-reporting obligation on specified reporting entities and does not create a separate new tax rate for investors.
However, it can increase the Income Tax Department’s visibility over crypto transactions. Investors reporting Capital Gains on Crypto Transactions should therefore reconcile exchange records, wallets, TDS details, and income-tax return disclosures carefully.
For Tax Year 2026-27 onwards, taxpayers should also understand the information available in Form 168 of the Income Tax Act, which forms part of the new tax-information framework.
4 Tax-Planning and Record-Keeping Strategies
1. Maintain Transaction-Level Cost Data
For Capital Gains on Crypto Transactions, maintain records of:
- Date and time
- Token
- Quantity
- INR acquisition cost
- Wallet or exchange
- Sale or transfer value
- TDS
- Nature of transaction
Do not rely only on the current wallet balance.
2. Do Not Assume Loss Harvesting Works Like Shares
Traditional share-market loss-harvesting strategies cannot automatically be applied to VDAs.
The special VDA loss restrictions must be considered before using losses in tax planning.
3. Track Token-to-Token Swaps
Maintain records for every crypto swap, including the value of the assets exchanged and their acquisition cost.
A transfer can occur even when there is no INR withdrawal.
4. Reconcile Exchange, Wallet and Tax Data
Compare:
- Exchange statements
- Wallet transactions
- TDS records
- Tax information statements
- VDA disclosures in the income-tax return
For periods governed by the earlier framework, taxpayers can use the Annual Information Statement (AIS) as an important reconciliation tool for financial information reported against their PAN.
Internal wallet transfers should also be separated from actual disposals to avoid double-counting.
Case Study: Crypto Profit and Loss Across Investments
Suppose an investor has:
- Bitcoin gain: ₹6 lakh
- Altcoin loss: ₹4 lakh
- Share-market long-term capital loss: ₹2 lakh
It would be incorrect to simply conclude that the investor has zero taxable investment income.
The special VDA loss restrictions prevent ordinary cross-set-off assumptions. Capital Gains on Crypto Transactions must therefore be evaluated separately from losses arising from shares or other asset classes.
Crypto Tax Mistakes to Avoid
Common mistakes while calculating Capital Gains on Crypto Transactions include:
- Paying tax only on overall net portfolio profit
- Treating 1% TDS as the final crypto tax
- Deducting inadmissible expenses
- Ignoring crypto-to-crypto swaps
- Setting VDA losses against stock, property, or gold gains
- Carrying forward disallowed VDA losses
- Failing to reconcile multiple exchanges and wallets
Crypto Tax Checklist for 2026
Before reporting Capital Gains on Crypto Transactions, taxpayers should:
- Export transaction histories from all exchanges
- Reconcile exchange and personal-wallet activity
- Separate internal wallet transfers from taxable disposals
- Identify taxable transfers and swaps
- Establish the cost of acquisition
- Reconcile applicable TDS
- Complete applicable VDA reporting in the return
- Avoid prohibited loss set-offs and carry-forwards
- Preserve supporting transaction records
- Review gifts and token swaps separately
Taxpayers who require assistance in reporting crypto and other taxable income can also consider professional Income Tax Return filing support to ensure that the correct income, tax credits, and disclosures are included in the return.
Need Help With Crypto Tax Filing in India?
Crypto tax can get complicated when multiple exchanges, wallets, TDS deductions, token swaps, and VDA losses are involved. Ebizfiling can help you review your crypto transactions, reconcile tax records, identify the correct VDA income, and complete the required Income Tax Return disclosures accurately.
Whether you are an investor, active trader, or business dealing in Virtual Digital Assets, our tax experts can assist with crypto tax computation, ITR filing, TDS reconciliation, and compliance under the Income-tax Act, 2025.
Make your crypto tax filing simpler with Ebizfiling.
Conclusion
Capital Gains on Crypto Transactions require a specialised tax approach because India’s VDA regime differs substantially from ordinary capital-gain taxation.
The law imposes a 30% special rate on income from VDA transfers, generally restricts deductions to cost of acquisition, prohibits specified loss set-off and carry-forward, and applies 1% TDS to qualifying VDA transfers involving residents.
Crypto Taxation in India 2026 also introduces a stronger transaction-reporting environment. Investors should maintain transaction-level records, review token swaps and gifts carefully, reconcile exchange and TDS information, and report Capital Gains on Crypto Transactions according to the special VDA provisions rather than relying on normal portfolio-netting principles.
Frequently Asked Questions
1. Does Schedule VDA require every crypto transfer to be reported separately?
Yes. Schedule VDA requires transaction-wise reporting, with every transfer treated as a separate transaction. Details such as acquisition date, transfer date, head of income, cost of acquisition, consideration received and income from transfer are reported separately.
2. Can VDA income be reported under either Capital Gains or Business Income in Schedule VDA?
Yes. Schedule VDA specifically contains a field to identify whether income from a particular VDA transfer is taxable under Business Income or Capital Gains. The appropriate classification depends on the taxpayer’s facts and nature of activity; the special VDA tax provisions continue to apply as applicable.
3. Who is responsible for deducting TDS in a direct OTC crypto transaction?
Where the buyer and seller deal directly in an over-the-counter VDA transaction, the buyer is generally responsible for deducting the applicable TDS from the consideration paid to the resident seller.
4. Who deducts TDS when a crypto transaction takes place through an exchange or broker?
The responsibility depends on the transaction structure. Where an exchange directly pays the seller, the exchange may deduct the tax. Where a broker is involved, the exchange and broker may have responsibilities, subject to the prescribed framework and any permitted written arrangement between them.
5. Is TAN compulsory for every individual or HUF deducting TDS on a VDA transaction?
No. A person falling within the statutory category of a specified person is not required to obtain a TAN solely for the VDA TDS obligation. Such taxpayers can comply through the prescribed PAN-based mechanism.
6. When does the obligation to deduct TDS on a VDA transaction arise?
TDS is generally required at the earlier of the time the consideration is credited to the resident transferor or the time it is paid by any mode. The timing rule therefore applies even where payment and accounting entries occur on different dates.
7. What is Form 141 for VDA transactions under the Income-tax Act, 2025?
Form 141 is the unified PAN-based challan-cum-statement introduced under the Income-tax Act, 2025. It replaces earlier PAN-based forms including Form 26QE, and its VDA schedule covers applicable TDS on transfer of Virtual Digital Assets under Section 393(1).
8. What is Form 142 and when is it relevant to a crypto exchange?
Form 142 is a PAN-based quarterly statement for qualifying VDA exchanges that have agreed, under the prescribed mechanism, to deposit tax on behalf of buyers or brokers. It must generally be furnished electronically within one month from the end of the relevant quarter.
9. Can Ebizfiling help correct an incorrectly reported crypto transaction after the ITR has been filed?
Yes. Ebizfiling can assist in reviewing an incorrectly reported VDA transaction and determining whether a revised return, updated return or another appropriate compliance route is available, depending on the applicable assessment/tax year, nature of the error and statutory time limits.
10. Can Ebizfiling help determine the correct ITR form where a taxpayer has crypto investments and business income?
Yes. Ebizfiling can assist in determining the appropriate ITR form based on the taxpayer’s sources of income and the manner in which VDA income is reportable. For example, ITR-2 generally applies to eligible individuals/HUFs without business or professional income, whereas ITR-3 is relevant where business or professional income is present.
Tax Consultancy Services
Have questions in mind regarding your income tax or GST ? Got a notice about tax from government department? Don’t worry! Get on call with Ebizfiling experts
About Ebizfiling -
Reviews
BRITISH INTERNATIONAL LANGUAGE SCHOOL
09 Nov 2017I appreciate your service to get the Certificates will benefit the people who are seeking to start a business. The time you took is very short time to get a certificate is excellent. Definitely I will refer your service to others . Thank you for your excellent service. Regards, S.D.Antoni Martin Pondicherry
Lakshman Rajpurohit
28 May 2017We are looking for company who provides registration and process for SSI certificate. We contact ebizfiling and they have done job for us in a smooth way. we really appreciate their service and quick turn around time. Special Thanks to team of ebizfiling India pvt. ltd.
Nayanshree Barsaiyan
08 Jul 2019My requirement was fulfilled on time. the customer care response is very prompt.
September 17, 2026 By Siddhi R
EPFO Wage Ceiling Increased to ₹25,000: Key Impact Explained Introduction The EPFO wage ceiling increased proposal has been approved by the Union Cabinet based on the recommendation of the Ministry of Labour & Employment to enhance the mandatory EPFO coverage […]
September 17, 2026 By Riyansh S
Defective Return Notice: Resolve Schedule BS & PL Errors Introduction Receiving a Defective Return Notice from the Income Tax Department means that the filed Income Tax Return (ITR) contains incomplete, inconsistent, or incorrect information that requires correction. Such notices are […]
September 17, 2026 By Srishti M
Property Sale Tax Planning in India 2026: LTCG & Key Rules Introduction Selling a property is not only about negotiating the right price. The date of transfer, holding period, stamp-duty value, residential status, reinvestment strategy and TDS can materially change […]