Overview of India’s tax regulations
The Indian Tax Act for fiscal year 2024-2025 treats cryptocurrency as a virtual digital asset (VDA) under the Income Tax Act of 1961. Section 2 (47A) means that it means. The only exception is money itself – Indian Rupee or Fiat currency in other countries.
VDAs include cryptocurrencies such as Bitcoin (BTC) and ether (ETH), as well as inappropriate tokens (NFTs) and similar digital tokens. It is legal to buy, sell, or hold a VDA, but it is not recognized as a valid payment method.
In other words, ciphers operate in 2025 in India’s legally ambiguous space. It is permitted, but is closely monitored for taxation and money laundering (AML) purposes.
Several institutions in India oversee crypto trading. The Income Tax Bureau is led by the Central Direct Tax (CBDT) based on the Ministry of Tax to implement tax compliance, which establishes tax policies.
Meanwhile, the Financial Information Unit (FIU-IND) ensures that the platform meets AML standards and that the Reserve Bank of India (RBI) and the Securities and Exchange Commission of India (SEBI) will form a broader regulatory policy.
These agencies work together to oversee the country’s crypto tax.
In 2025, the Income Tax (No. 2) bill received the President’s consent on August 22, 2025, and replaced the Income Tax Act in 1961.
Taxation events for crypto traders in India
India conducts crypto transactions under a specific tax framework, with a 30% tax on profits from transfers and a 1% tax deducted at source (TDS) applicable to all transfers, whether profitable or not.
Taxation events in Crypto are activities that cause tax liability under Indian law. This includes transactions that generate Fiat Money’s income, profits, or measurable profits. If you are a transaction or investment, knowing what you count as a taxable event is key to staying compliant with the Income Tax Act.
Major tax events include:
- trading: Exchange of cryptocurrencies for another cryptocurrency or Fiat currency is taxable.
- Reward staking: It will be counted as income when received.
- Airdrop and hard fork: When a token is credited, it is treated as income.
- Mining revenue: It is taxed as income, and subsequent sales are subject to capital gains tax.
- Crypto Payment: It is considered a taxable business or occupational income.
Non-tax events include retaining digital assets without selling or transferring crypto between individual wallets. These actions are not subject to taxes as they are not generating income or profits.
Did you know? Indian laws do not offer tax cuts if you lose your code due to theft or hacking. Non-compliance can attract penalties, benefits and prosecution for intentional avoidance.
Crypto-tax rates and classifications
In India, income from cryptocurrencies is primarily categorized as either business income or capital gains. If the transaction is periodic and systematic, revenue is taxed as business income under the Standard Income Tax Slab. For most individual investors, profits from buying and selling cryptocurrency are considered capital gains.
As of August 22, 2025, both VDA’s Short Term Capital Gains (STCG) and Long Term Capital Gains (LTCG) are taxed at a flat 30% tax rate based on section 115bbh.
This rule can be applied regardless of the duration of the asset. No deductions except acquisition costs are permitted and losses from one VDA cannot be offset or advanced against another VDA.
Business revenue from Crypto is taxed at slab rates, but often face similar tax burdens as the VDA’s 30% tax rate is flat.
Additionally, a 1% TDS applies to all cryptographic transfers above a certain threshold, ensuring cross-platform transparency and compliance. This includes central exchange and peer-to-peer (P2P) transactions.
Indian VDA TDS
India’s tax framework on cryptocurrency includes 1% TD under section 194S. This mandatory deduction applies to most VDA transactions and was introduced to improve compliance and monitor the growing crypto market. The main aspects of cryptographic TD are as follows:
- TDS mechanism: When purchasing a VDA, the buyer deducts a fixed percentage of the sales amount as TDS and deposits it with the government. This deductible amount is tax withheld from the seller’s payment.
- TDS Rate and Threshold: Section 194S charges a TD of 1% on the sale if the transaction exceeds INR 50,000 in the fiscal year. In certain cases, this threshold will be reduced to Rs 10,000.
- TDS for non-cash transactions: If a buyer purchases a VDA using another VDA (non-cash payment), he or she must deduct a 1% TD in cash based on the value of the sale and submit it to the government.
- Mixed Payment Scenarios: If the buyer pays a VDA with a combination of cash and non-cash combinations (e.g., another VDA), if the cash portion is insufficient to cover a 1% TD, the buyer must pay an additional TDS amount from his own funds.
- There are no sunburn requirements for certain people: Section 203A does not require a “specified person” (defined under the law) to obtain a tax deduction and collection account number (TAN) for the purposes of the TDS.
- TDS exemption for designated persons: If the considerations for the total VDA for the fiscal year are less than Rs 50,000, the TDS will not be deducted for the designated person.
- TDS exemption for non-specified people: For individuals other than a particular person, if the VDA consideration is less than Rs 10,000 in the fiscal year, the TDS is not deducted.
- Priority over ecommerce rules: If a VDA transaction falls under both Section 194S and Section 194-O (related to e-commerce operators), the provisions of Section 194S take precedence.
- TDS for suspense or temporary accounts: If the buyer has deposited VDA payments in a seller’s suspension or temporary account, the seller is responsible for deducting the TDS.
Did you know? Forex usage does not exempt traders from profits from offshore platforms. They must declare a transaction in India’s ITR.
How to calculate Indian crypto tax
To calculate the crypto tax in India, you must first determine the cost base. This is the VDA purchase price and related expenses such as exchange fees and transaction fees. This serves as the basis for calculating profits or losses when an asset is sold or transferred.
Traders may use first-in-first-out (FIFO), first-out (FIFO), final first-out (LIFO), or specific identification, depending on the accuracy of their records. The selected method affects taxable gain calculations and should be used consistently.
In crypto-to-crypto transactions, a transaction is treated as selling one asset (causing profit or loss) and being valued at a fair market price at the rupees at the time of transaction.
Certain costs such as transaction fees, wallet or replacement fees, and cryptographic tax software costs can be included in acquisition costs. However, Indian law does not allow wider deductions beyond these acquisition costs.
India’s crypto tax reporting and compliance requirements
India’s tax laws make it mandatory to report crypto transactions without exceptions. Income must appear in the VDAS category. ITR-2 usually covers capital gains, while ITR-3 applies to business revenue. Starting in 2025-26, the new Schedule VDA requires that each crypto transaction be reported individually.
Taxpayers must maintain accurate records including transaction details, exchange statements, wallet addresses and ratings of the rupee to support their applications. These records are particularly crucial during audits or scrutiny.
For individuals who do not require an audit, the deadline for filing their income tax returns in 2025 is July 31, 2025. Companies that require an audit must submit it by October 31, 2025.
Non-compliance can lead to penalties such as interest on unpaid taxes, penalties for late applications, and potential prosecution of intentional tax evasion. Therefore, timely and accurate reporting is important for crypto traders and investors.
Did you know? Crypto gifts are taxable if received from relatives or if the value exceeds Rs 50,000 on a certain exemption opportunity.
Issues and general issues for Indian crypto traders regarding taxation
Taxation is a complex problem for Indian crypto traders due to the changing regulations and limited clarity in certain areas of the crypto ecosystem. While profits from VDAs are taxed, some challenges create confusion and compliance difficulties.
The key issues are:
- Lack of clarity in Defi and NFTS tax laws: Regulations regarding staking, lending and NFT sales are unknown and inconsistent reports are made.
- Track mass trades across multiple platforms: Frequent trading in various exchanges makes it difficult to accurately calculate profits and maintain records.
- Tax impacts on cross-border transactions: Using Forex or Wallets creates issues related to the Forex Management Act 1999 (FEMA), double taxation and international reporting requirements.
- Handling lost or stolen crypto assets: India’s tax law does not provide relief for theft or loss, making traders uncertain about how to report such events in their filings.