How to Pay Tax on Crypto in India (FY 2025-26 | AY 2026-27): Complete Compliance Guide

As per the latest data, India has more than 20 million active cryptocurrency users. If you have bought, sold, exchanged, staked, or mined crypto in FY 2025-26, you will have tax obligations. The failure to fulfill these obligations may not only attract penalties, but you can also end up losing even more than the amount of taxes owed.

The situation has become so extremely strict that there is no scope for discussion – be it the straight 30% tax on crypto gains as per Section 115BBH or the 1% TDS under Section 194S. Though compliance may seem like a daunting task at first, you can actually handle it quite well after a little learning.

Also, if in the end, you choose to give the job to a professional who regularly works on crypto ITR, the tax experts at LegalRaasta are ready to take care of everything for you – from preparing Schedule VDA to the correct e-filing of your ITR-2 or ITR-3.

What is Cryptocurrency Under Indian Tax Law? (VDA Definition)

India has not explicitly defined the word “cryptocurrency” in its tax laws. Still, the term used by the Income Tax Act 1961 is Virtual Digital Asset (VDA), which is defined in Section 2(47A).

This definition was introduced by the Finance Act 2022, and next, the Finance Act 2025 made a move to explicitly include the term “crypto-asset” in a new sub-clause, thereby removing any leftover interpretative uncertainty.

Legal Definition — Section 2(47A)

VDA means: ”Any code number or token created by cryptography ”VDA includes all cryptography-based data (like all kinds of cryptocurrencies, like Bitcoin, Ethereum, other coins, and tokens, or NFTs)’.

VDA excludes: Indian currency, foreign cheque, gift card, subscription voucher, loyalty reward points, and Miles points.

This effectively means you now pay VDA taxes when you buy Bitcoin, Ethereum, BNB, Solana, USDT, MATIC, in fact, any altcoin, and yes, every NFT. If you are trading any of these, then you are within that tax net.

The VDAs can be summarized as three wide categories:

Cryptocurrencies — Bitcoin (BTC), Ethereum (ETH), and all other tradeable coins listed on exchanges 2.

Tokens: utility tokens, governance tokens, stablecoins used on DeFi.

NFTs (non-fungible tokens and items such as digital art, gaming assets, and collectibles

Crypto Tax Regulations in India for FY 2025-26

The standards of crypto taxation in India, FY 2025- 26, are derived from the Finance Act 2022.

The Budget 2025-26 has not increased any rate, but the reporting requirements were stricter and the penalties more severe.

Gain at the time of transfer of a VDA (e.g., cashing out your Bitcoin for INR, bilaterally exchanging ETH & SOL, buying a product via crypto) at a flat rate of 30% (Section 115BBH). Meanwhile, a 4% ‘Health and Education Cess’ is levied, so the effective rate stands at 31.2%. There is a surcharge levied on incomes over prescribed limits.

Critical Restrictions — Section 115BBH

No expense deduction allowed except the cost of acquisition. Exchange fees, transaction charges, and internet costs — none of these reduce your taxable gain.

No loss set-off — crypto losses can’t be set off against crypto gains, or against any other income. They can’t be carried forward either. Every profitable trade stands alone.

No slab benefit — even if your total income is below ₹7 lakh, the Section 87A rebate does not apply to crypto gains taxed under Section 115BBH.’

1% TDS Under Section 194S

To track crypto transactions, the government mandates a 1% Tax Deducted at Source on the transfer of VDAs under Section 194S, effective from July 1, 2022. 

This applies every financial year, including FY 2025-26. The TDS is not an extra tax — it’s an advance payment that you can claim as a credit when you file your ITR.

Types of Crypto Income That Are Taxable in India

The 30% flat rate under Section 115BBH applies when you dispose of a VDA.

But when you receive crypto income — through any of the sources, say, staking, mining, airdrops, or as a gift — the treatment is different. Let’s see the full breakdown for the virtual digital asset tax in India:

Key point on gifts: Crypto received as a gift from a close relative (spouse, siblings, parents, or lineal descendants) is exempt from tax at the time of receipt. But if you sell it later, the 30% rate applies to the gain from the original cost.

Calculating Crypto Tax in India — How to do?

The one formula to calculate your crypto tax liability for FY 2025-26 is listed below: 

• Taxable Gain = Sale Price − Cost of Acquisition
• Tax Payable = Taxable Gain × 30% + 4% Cess on Tax

The cost of acquisition is simply what you paid to buy the crypto — the purchase price in INR on the day you bought it. Nothing else (not exchange fees, not wallet costs) can be added to it.

Worked Example — Rahul’s Bitcoin Trade (FY 2025-26)

Now, imagine Rahul also made a loss of ₹2 lakh on an Ethereum trade in the same year. He cannot set off that ₹2 lakh loss against the ₹10 lakh Bitcoin gain. 

The ETH loss just disappears, and hence he can’t carry it forward next year. This is where crypto tax in India FY 2025-26 differs sharply from how equity or mutual fund gains work.

For multiple trades: Calculate the gain or loss on each transaction separately. Sum only the gains; losses are disregarded for tax purposes. Apply 30% to the total gains.

Explaining Section 194S- TDS on Crypto Transactions

One of the biggest aspects to keep in mind if you are trading in crypto in India is the 1% TDS under Section 194S. This is not an additional tax; it is a withholding tax, that is, an advance payment of your tax liability, deducted at the transaction level.

When does TDS become applicable?

TDS will be applied if your total value of virtual digital assets (VDA) transactions during a financial year is more than:

• 50,000 per year for individuals and HUFs who are not required to get their accounts audited (this will include most regular investors)
• 10,000; you have to pay per year for all the remaining categories. 

Who is responsible for deducting TDS?

Trades made through exchanges: Indian cryptocurrency exchanges like CoinDCX, CoinSwitch, and WazirX are responsible for the 1% TDS deduction on your behalf and the depositing of the same with the government.

You will find this reflected on your Form 26AS and Annual Information Statement (AIS).

Trades done through peer-to-peer (P2P) platforms: The onus of deducting TDS and paying it to the government lies with the buyer. This is very important – when you are buying crypto directly from a seller, without the intervention of a third party, for example, a crypto exchange, then TDS deduction of 1% must be done and deposited using Form 26QE.

Foreign exchanges: If you are trading on Binance or other foreign platforms, they will not deduct TDS for India. The buyer in any P2P arrangement remains responsible.

How to Claim TDS Credit?

Your TDS withholding on transactions shall be reflected in the Form 26AS and AIS (Annual Information Statement) on the Income Tax portal.

You can claim this as a tax credit at the time of filing your ITR of AY 2026-27 in the section of tax payments, thereby reducing the tax payable.

Always cross-check your Schedule VDA with the AIS records before filing to avoid a defective return notice.

How to Report Crypto Income in Your ITR — AY 2026-27

ITR filing for crypto income in India for AY 2026-27 requires you to use the correct form and fill Schedule VDA accurately. Here’s what you need to know.

What to Fill in Schedule VDA?

Schedule VDA is mandatory for all crypto taxpayers from FY 2025-26 onwards. For each VDA transaction, you must enter:

• Date of acquisition of the VDA
• Cost of acquisition (purchase price in INR)
• Date of transfer (sale/swap/disposal)
• Sale consideration (amount received)
• Head of income under which the gain is reported
• Computed gain or loss for each transaction

Download your P&L reports: Export capitagains/tradede history from every exchange you used — CoinDCX, WazirX, CoinSwitch, Binance, KuCoin, etc.

Check your AIS and Form 26AS: Log in to incometax.gov.in, download your Annual Information Statement. This shows what the IT Department already knows about your crypto activity.

Calculate gains trade-by-trade: For each disposal, compute Sale Price − Cost of Acquisition. Sum all gains (ignore losses). This is your taxable VDA income.

Choose ITR-2 or ITR-3: Passive investors use ITR-2; active traders with business income use ITR-3.

Fill Schedule VDA: Enter each transaction with acquisition date, cost, sale date, and sale value.

Claim TDS credit: Add TDS amounts from Form 26AS under the tax payment section to reduce your net tax payable.

Pay advance tax or self-assessment tax: If tax due exceeds ₹10,000 after TDS, pay the balance before filing to avoid interest.

File and e-verify by July 31, 2026: The ITR deadline for most individuals for FY 2025-26 (AY 2026-27) is July 31, 2026.

Tax on Crypto Mining and Staking in India

Mining and staking versus trading are a bit different from a taxation point of view. It is an important aspect because the 30% under s.

115BBH cannot be levied when you initially get the mined or staked tokens: the fact is that the tokens you get initially are charged to you at your income tax slab rate under s.56(2) of the Income Tax Act; selling the token, or gaining profit, is charged at 30% rate.

Each time you mine a block and get rewarded in crypto, the FMV of the coins you got paid in on that day will be considered business income and taxed at your slab rate.

If you are doing a large-scale mining operation where you have people, machinery, and activity, it will be very clear that this is business; even a person who is mining as a hobby with a rig may still count as a business.

If you are a hobbyist, your income is still taxable, but perhaps as “Income from Other Sources”. When those coins are next sold by them, and if the gain exceeds the FMV on which the tax was paid, then a 30% rate will be charged after Section 115BBH.

Staking rewards are the tokens that you get from the protocol when you commit your crypto and are taxed on the FMV at the time they are received, as per their name value and your individual slab rate. Transferring tokens into a staking pool is not a taxable event.

But if these tokens land in your wallet, it is taxable. And when you decide to sell such staking rewards at a later stage, what happens is that Section 115BBH30% gets applied on the profit from the value at which you were taxed.

Penalties for Not Reporting Crypto Income — What’s at Stake

The Income Tax Department has issued in excess of 44,000 notices for crypto income in the last few years alone and has uncovered crores of undisclosed VDA income.

In December 2025, government data presented to Parliament revealed 29 arrests and 22 prosecution complaints about tax action in the crypto realm.

This is no longer a theoretical risk, as the following ones are included: 

Financial Penalties

Interest u./s 234A, 234B, 234C: If you file late or fail to pay advance tax, 1% interest becomes payable on the unpaid tax for each month or part of a month. Fast-accruing interest can quickly increase for substantial crypto profits.

Under-reporting penalty (Section 270A): For each greater-than-10%-understatement of your crypto income, you pay 50% of the tax payable on the understatement. Misreporting penalty (Section 270A): If you knowingly provide incorrect acquisition costs or hide transactions, then the penalty rises to 200% of the tax liability.

Identified undisclosed income unearthed in a raid (s 158B): From the 2025 Finance Act, VDAs are called “undisclosed income”; when the IT Department audits an undisclosed crypto, the entire sum is charged as a DLA at an effective flat rate of 60% within the previous six assessment years, plus penalty.

Criminal Prosecution

Also, deliberate evasion of more than Rs. 25 Lakh attracts prosecution under section 276C, with imprisonment from a minimum of 6 months to a maximum of 7 years.

The Supreme Court has clarified that these provisions are intended to hit only willful attempts to evade, whereas honest mistakes, which are rectified by the assessee by filing the revised return, may not call for prosecution.

But willfully suppressing income, filing false figures, or routing trades through unregistered exchanges to evade TDS trail, that may be criminal?

Tips to Reduce Your Crypto Tax Legally

You cannot simply change the 30% rate as it is set by law. (Still, there are clever ways to legally reduce your overall crypto tax liability.)

Transaction-level record keeping: This is maybe the most obvious,s but still, every single trade should be accompanied by a purchase date, purchase price in INR, sale date,e and sale price.

If such information is not present, then you will really struggle in substantiating your cost of acquisition (the IT Department may likely compute your gains with some other much higher base in that case).

Maintain FMV records for mined & staked tokens: Tax paid at receipt under your slab rate determines your cost basis for the resulting 30% calculation. Determine and note the FMV at each receipt date.

Stay away from taxable events: Moving crypto between your own wallets doesn’t create a taxable event. Besides that, be sure to meticulously record the wallet addresses so that they won’t accidentally be interpreted as a sale.

Be transparent about cost averaging: If you bought the same coin at various prices, the acquisition cost must be available for each sale to support the sale. Ensure that you have accurate physical evidence for every purchase.

Submit your return and pay advance tax on time: In case your estimated tax after deducting TDS exceeds 10 0,00, you should pay advance tax by 15th September, 15th December,r and 15th March at the latest; otherwise, you will become liable for Section 234C and 234B interest.

Giving gifts: Crypto gifts given to relatives or close friends are a good way of tax planning, as they are considered nil receipts. Just remember to document the transfer and FMV on the date of the gift.

What’s Next for Crypto Taxation in India?

In case 1 percent TDS prevailed in August 2025, CBDT, as if testing the waters, sought inputs and comments from the industry on whether the rate should be reduced and whether a general permission for loss set-off should be given. 

Those are the two most contentious issues of the present scheme, and Truth is, that the government dared to seek answers to these issues shows that there is at least one hope for this scheme.

What is solid: In the case of a 30% flat rate, there is no scope for public consultation at all. Decisions, now by the Minister (June 2022), are not being investigated.

The taxes on crypto in India should be one of the most aggressive ones. Let’s maintain our comparisons with other countries, like Singapore, the UAE, and even the US, based on income group.

India is forcing and enforcing rather than forcing, and we don’t believe the latter will happen anytime soon. Changes on the cards: Set to enter into force in April 2027 (subject to possible amendments), the Indian Govt will by then have implemented the OECD’s Crypto-Asset Reporting Structure (CARF), i.e., a system to facilitate cross-border automatic data exchange (through key partners) on crypto activities.

Now, It’s Time for Your Turn

Looking for help with your crypto ITR?

Signing up for crypto ITR filing is not so simple, as there are a lot of transactions involved, like a lot of exchanges and P2P trades, staking income, TDS reconciliation, Schedule VDA, and a lot of rules. LegalRaasta tax team filing for crypto returns has regular experience in the same and makes sure your filing does not miss anything. Just share the details and sit relaxed on 31 July.

FAQs

What will be the tax rate on crypto profits under crypto tax in India, FY 2025-26?

Currently, Crypto profits in India for FY 2025-26 are taxed at a flat 30% (an effective 31.2% including cess), regardless of your income slab. Additionally, a 1% TDS applies to all crypto sales and transfers. 

Is 1% TDS deducted on every crypto transaction under Section 194S?

No, the 1% TDS only applies if your total crypto transactions in a financial year exceed ₹50,000 (for regular individuals) or ₹10,000 (for specified business owners/professionals). Indian exchanges will deduct this automatically once you cross the threshold.

Could I potentially set off crypto losses against other income when filing crypto tax in India, FY 2025-26?

As per Section 115BBH, loss set-off is completely disallowed. Losses from VDA cannot be used for offsetting against other gains from VDA or any other source of income, nor can these losses be carried forward to subsequent years. Every gain is separately taxable.

What ITR form is appropriate for virtual digital asset tax in India?

Opt for ITR-2 if your crypto earnings are passive – profits from trading, staking, or airdrops recognized as capital gains or other sources. Take ITR-3 if your crypto business income results from the time you spent in trading, professional mining, or organized DeFi operations. Both these forms provide Schedule VDA.

Is staking income taxable in India, and what would be the rate that applies for crypto tax in India, FY 2025-26?

In fact, staking rewards are categorized as per your applicable income tax slab rate as their Fair Market Value on the date of receipt. Then, if you further sell those staking tokens, Section 115BBH shall tax these additional gains at the rate of 30%.

What will be the consequences if I don’t disclose my earnings? What is the fine for not revealing crypto income?

Hiding your crypto income can lead to a 50% to 200% penalty on the tax payable, while major tax evasion over ₹25 lakhs can result in up to 7 years in prison. Additionally, you can face flat fines for inaccurate reporting or non-disclosure. 

Is there any exemption limit or basic threshold for crypto tax in India, FY 2025-26?

None. From the first rupee onwards, any gain is in the 30% bracket, as there is no minimum threshold. Only non-applicability is for VDA gains under sec 115BBH; no rebate u/s 87A (income up to 7 lakh under the new tax regime). The entire amount of crypto profit is subject to 30% tax.