The Core Rule: A Flat 30% Tax on Gains
Since the Union Budget of 2022, India has a specific tax regime for what it calls Virtual Digital Assets (VDAs), which includes all cryptocurrencies and NFTs. Any profit you make from transferring a VDA is taxed at a flat rate of 30%, plus applicable
cess and surcharges. This single rate applies to everyone, regardless of your income tax slab or how long you held the asset. Whether you sell Bitcoin for Indian Rupees or swap Ethereum for a stablecoin, the gain is considered a taxable event. The government's stance has been consistent, with the 2026-27 budget maintaining this framework.
The 'No Set-Off' Rule Shocks Investors
This is one of the harshest and most misunderstood parts of India's crypto tax law. You cannot offset your losses from one VDA against the gains from another. For example, if you make a ₹50,000 profit on one cryptocurrency but suffer a ₹40,000 loss on another in the same year, you still have to pay the 30% tax on the full ₹50,000 gain. The loss is completely ignored by the tax authorities. Furthermore, these losses cannot be carried forward to future financial years or set off against any other income, like salary or stock market gains.
Understanding 1% TDS on Transactions
To create a trail of transactions, the government implemented a 1% Tax Deducted at Source (TDS) on VDA transfers under Section 194S of the Income Tax Act. This applies when the total value of your transactions in a financial year exceeds a threshold, which is ₹50,000 for most individuals and ₹10,000 for others. If you trade on an Indian exchange, this TDS is typically deducted automatically. For peer-to-peer (P2P) trades or transactions on international exchanges, the buyer is responsible for deducting and depositing the TDS. Crucially, this 1% TDS is not an extra tax; it's an advance payment that you can claim as a credit against your final tax liability when you file your returns.
What About Deductions and Other Incomes?
The rules on deductions are extremely strict. The only expense you can deduct from the sale price of a VDA is its original cost of acquisition. This means other common expenses, such as exchange trading fees, wallet transfer (gas) fees, or interest paid on loans taken to invest, are not deductible. Income from activities like staking, mining, or airdrops may also be taxable, though specific guidance is still evolving. For now, they are generally treated as income and taxed according to your individual slab rate.
Navigating the 'Regulatory Uncertainty'
The headline's 'regulatory uncertainty' refers to the fact that India has not yet passed a comprehensive bill to regulate cryptocurrencies as a whole. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, was never formally introduced in Parliament. As of late 2026, the government has indicated it is not keen on creating a regulatory framework that might legitimize crypto, preferring to focus on its own Central Bank Digital Currency (CBDC). However, this legislative indecision does not create a tax vacuum. The tax laws, introduced through the Finance Act of 2022 and enforced by the Central Board of Direct Taxes (CBDT), are clear, active, and increasingly enforced with stricter reporting requirements and penalties for non-compliance.
