India has one of the most specific tax regimes for Virtual Digital Assets (VDAs). Regradless of whether you make a profit or loss, you need to understand two main components: Flat 30% Tax and 1% TDS.
30% Tax on Profits
Any income from the transfer of standard crypto assets is taxed at a flat rate of 30% (plus cess).
1% TDS on Accural
1% Tax Deducted at Source (TDS) is deducted on the sale transaction value if it exceeds certain thresholds.
1. The 30% Flat Tax
Under Section 115BBH, any income from the transfer of any VDA is taxed at 30%.
- No Slabs: Even if your total income is below the taxable limit, your crypto gains are taxed at 30%.
- No Deductions: You cannot deduct expenses (like internet, electricity, advisory fees). Only the cost of acquisition can be deducted.
- No Set-off: Loss from one crypto asset cannot be set off against profit from another. (e.g., Bitcoin profit cannot cover Ethereum loss).
2. 1% TDS (Tax Deducted at Source)
Under Section 194S, 1% TDS gets deducted on the sale of crypto assets effectively from July 1, 2022.
Who deducts it?
If you trade on an FIU-registered Indian exchange, the exchange automatically deducts this and deposits it with the government against your PAN. This is a huge convenience advantage of using Indian exchanges.
How to File?
You need to file your taxes using ITR-2 or ITR-3 forms, specifically in the Schedule VDA section.
Simplify Your Taxes
Trading on registered Indian platforms simplifies compliance because they handle TDS and provide clear tax reports.