India’s Crypto Tax: A Four-Layered Reality
Indian crypto investors face a stringent and layered tax structure for Virtual Digital Assets (VDAs) as of 2025. According to experts, the rules are “uncompromising,” regardless of whether the market is bullish or bearish.
1. Flat 30% Income Tax:
Under Section 115BBH of the Income Tax Act, all gains from the transfer of VDAs—including Bitcoin, Ethereum, and NFTs—are taxed at a flat 30%. With a 4% cess, the effective tax rate climbs to 31.2%. There are no deductions for expenses like “gas fees,” and losses from crypto trading cannot be set off against other income or carried forward to future years.
2. 1% TDS on Transactions:
Section 194S mandates a 1% Tax Deducted at Source (TDS) on every sale transaction, provided the annual value of transactions exceeds ₹10,000 (or ₹50,000 for certain small investors). This TDS is deducted by the buyer or exchange and is a crucial part of the tax department’s tracking system. The deducted amount appears in Form 26AS and is adjusted against the investor’s final tax liability.
3. 18% GST on Service Fees:
Since July 2025, an additional 18% GST is levied on the service fees charged by crypto exchanges and wallet providers. This tax applies to platform fees for services like trading, staking, and custody, but not on the value of the crypto asset itself.
4. Meticulous Reporting is Mandatory:
Investors must report every single VDA transaction, detailing the date, buy/sell values in INR, the platform used, and the TDS deducted. P2P trades and foreign exchange transactions must also be reported. A common mistake is reporting only the net gain instead of each individual trade. Using the correct Income Tax Return (ITR) form—ITR-2 for investments or ITR-3 for business activity—is essential. It is also critical to reconcile reported income with the TDS entries in Form 26AS to avoid tax mismatch notices.
In essence, while the crypto world champions decentralization, India’s tax rules are centralized and strictly enforced. Filing a clean, detailed return is the only way to navigate this tax landscape and avoid penalties.