Cryptocurrency (Bitcoin, Ethereum, etc.) is taxed in India under the category Virtual Digital Assets (VDAs). The government introduced specific tax rules in Union Budget 2022, mainly under Section 115BBH and Section 194S of the Income Tax Act.
Below is a clear explanation of how crypto is taxed in India.
1. 30% Tax on Crypto Profits
Any profit from selling or transferring cryptocurrency is taxed at a flat rate of 30%.
This applies to:
- Selling crypto for INR
- Crypto-to-crypto trading
- Spending crypto to buy goods/services
- NFTs and other digital assets
Example
- Buy Bitcoin: ₹1,00,000
- Sell Bitcoin: ₹1,40,000
- Profit: ₹40,000
Tax = 30% of ₹40,000 = ₹12,000 + 4% cess
Important points:
- No slab benefit (same tax for everyone)
- Holding period doesn’t matter
- Treated similar to lottery/winning income
2. Only Cost of Acquisition Allowed
Under Section 115BBH, you can deduct only the purchase cost of crypto.
Not allowed as deductions:
- Trading fees
- Internet cost
- Mining cost
- Exchange commission
3. Loss Cannot Be Set Off
Crypto losses have strict rules:
❌ Cannot adjust loss against:
- Other crypto profits
- Salary income
- Business income
❌ Cannot carry forward losses to future years.
Example:
- Bitcoin profit: ₹1,00,000
- Ethereum loss: ₹50,000
Tax will still apply on ₹1,00,000.
4. 1% TDS on Crypto Transactions
A 1% TDS is deducted on crypto transactions under Section 194S.
This applies when yearly crypto transactions exceed:
- ₹50,000 (for individuals / small investors)
- ₹10,000 (for others)
Example:
- Sell crypto for ₹1,00,000
- TDS deducted = ₹1,000
You receive ₹99,000, and ₹1,000 goes to the government as TDS.
This TDS can be adjusted while filing ITR.
5. Tax on Crypto Gifts
If someone gifts you cryptocurrency:
- If received from relatives → No tax
- If received from non-relative → Taxable if value > ₹50,000
Tax is charged under Income from Other Sources.
6. Crypto Mining Tax
Mining rewards are treated as income.
- Taxed as business income or other income at normal slab rates.
- When you later sell mined crypto → 30% tax applies on profit.
7. Reporting Crypto in Income Tax Return
Crypto transactions must be reported in Schedule VDA of the ITR.
Common ITR forms:
- ITR-2 → Investors
- ITR-3 → Traders / business income
Quick Summary
| Particular | Tax Rule |
|---|---|
| Tax rate on profit | 30% + cess |
| TDS on transactions | 1% |
| Loss set-off allowed | ❌ No |
| Carry forward loss | ❌ No |
| Deduction allowed | Only cost of acquisition |
| ITR reporting | Schedule VDA |
✅ Example Full Calculation
Investment: ₹2,00,000
Sale Value: ₹2,80,000
Profit = ₹80,000
Tax = 30% × 80,000 = ₹24,000 + cess
Many influencers and content creators today also earn through crypto promotions, NFT sales, and blockchain collaborations. If you want to understand how earnings from YouTube, brand deals, and social media promotions are taxed, read our detailed guide on Income Tax for Influencers and YouTubers in India.
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