Crypto Tax in India 2026: the 30% Flat Tax + 1% TDS Rule, Explained Simply

Quick Answer: Crypto gains in India are taxed at a flat 30% (plus 4% cess, so 31.2% effectively) in FY 2026-27, with only the cost of acquisition deductible. Losses cannot be set off or carried forward. A 1% TDS applies on transfers above ₹50,000/₹10,000 a year. Under the new Income-tax Act, 2025, the section numbers have changed — the substance hasn't. Imagine this: you made ₹6 lakh in crypto profits this year and lost ₹5 lakh on other trades. Your net gain is ₹1 lakh. How much tax do you owe? On stocks, you'd pay tax on the net ₹1 lakh. On crypto, you pay 30% on the full ₹6 lakh — about ₹1.87 lakh in tax on a ₹1 lakh net gain. Yes, really. That is the single most misunderstood fact about crypto taxation in India, and it hasn't softened in 2026. What has changed this year is the paperwork around it: new section numbers under the Income-tax Act, 2025, new reporting penalties for exchanges, and a consolidated tax-department explainer. This guide covers the 2026 edition — the rules, what changed, and how to stay compliant.

The 30% flat tax, in plain English

Gains from transferring "virtual digital assets" (VDAs) — crypto tokens, and certain NFTs — are taxed at a flat 30%, plus a 4% health and education cess on the tax, taking the effective rate to 31.2% (surcharge applies on top for very high incomes). The only deduction allowed is the cost of acquisition. Nothing else: no brokerage, no gas fees, no Chapter VIA deductions, no indexation. Three brutal corollaries, all still true in 2026: - No loss set-off. A loss on one crypto trade cannot be adjusted against a gain on another — or against salary, business, or capital-gains income of any kind. The ₹6 lakh/₹5 lakh example above is real arithmetic, not a trick question. - No carry-forward. Unused crypto losses die with the financial year. You cannot carry them to next year. - Rate applies to everyone. The 30% is flat — it doesn't matter whether you're in the 5% slab or the 30% slab. A college student and a CEO pay the same rate on crypto gains. These rules sit in what was Section 115BBH of the old Income-tax Act, 1961. Under the new Income-tax Act, 2025 (effective April 1, 2026), the numbering has changed — more on that below.

What's actually new in 2026

If you last read a crypto-tax guide in 2024, here's what changed: New section numbers (Income-tax Act, 2025, effective April 1, 2026). The substance is identical; the numbering moved. Old → new: Section 115BBH (30% tax on VDA income) → Section 194; Section 194S (1% TDS) → Section 393(1); the VDA definition in Section 2(47A) → Section 2(109); the reporting provision 285BAA → Section 509. Which numbering applies to you depends on the transfer date: transfers up to March 31, 2026 use the old numbers; from April 1, 2026, the new ones do. (This mapping is per tax-publisher analysis — CoinDCX, TaxGuru, September–October 2026 — and hasn't yet been cross-checked against the bare Act, so confirm with a CA if you're filing on it.) Budget 2026 changed nothing on rates. The February 2026 Budget left the 30% rate and the 1% TDS untouched — the Finance Minister made no mention of crypto in the speech, and industry requests for relief were rejected (Moneycontrol; Decrypt, February 2026). New penalties for exchanges, not you. Effective April 1, 2026, crypto exchanges and platforms must file statements of crypto-asset transactions (the new Section 509, via Section 446): ₹200 per day for non-filing and a flat ₹50,000 for inaccurate reporting. As KoinX's CEO told Moneycontrol, this targets platforms, not individual investors — but it means your exchange is now legally reporting your trades, which ends any "the department won't know" thinking. TDS-default jail time reduced. The maximum imprisonment for defaulting on TDS deposit fell from 7 years to 2 years (courts may convert it to a monetary penalty). Relevant mostly to platforms and P2P buyers who must deduct. New IT-department VDA explainer. In September 2026, the Income Tax Department reportedly released a consolidated explainer document covering VDA tax, TDS, covered assets, and reporting-entity penalties — described as the first single official reference document of its kind (single-source report; treat as indicative until the department's own release is confirmed). Finance Act 2025 added "crypto-asset" to the VDA definition. The definition still excludes gift cards, loyalty points, platform subscriptions, CBDC, and certain NFTs. One more 2027 deadline on the horizon: cross-border crypto data sharing under the CARF framework begins in April 2027 — offshore holdings become visible to Indian tax authorities automatically. If you trade on foreign exchanges, that invisibility window is closing.

Old vs new section numbers (the 2026 mapping)

Since guides, CAs, and the department may use either numbering for a while, keep this mapping handy: - 30% flat tax on VDA income: old Section 115BBH → new Section 194 - 1% TDS on VDA transfers: old Section 194S → new Section 393(1) - Definition of virtual digital asset: old Section 2(47A) → new Section 2(109) - Exchange/platform transaction reporting: old Section 285BAA → new Section 509 Rule of thumb: transfers on or before March 31, 2026 → old numbers; transfers from April 1, 2026 → new numbers. When in doubt, the description matters more than the number — "the 30% VDA provision" is unambiguous either way.

The 1% TDS: thresholds, who deducts, and the biggest myth

Every transfer of a VDA attracts 1% TDS on the transfer consideration (not on the profit — on the full sale value), once your annual transfers cross a threshold: - ₹50,000 per year — for "specified persons": individuals/HUFs with no business income, or business turnover below ₹1 crore / professional receipts below ₹50 lakh - ₹10,000 per year — for everyone else On Indian exchanges, the platform deducts it. On P2P deals or foreign exchanges, the buyer is legally required to deduct and deposit it — a rule many P2P traders don't know exists. The biggest myth: "TDS is the tax." It isn't. TDS is a prepayment credited against your final liability — you claim it via Form 26AS when you file. If your 1% TDS exceeds your actual tax (possible on low-margin trades), you claim a refund; if it's less than the 30% due, you pay the balance. NDTV's July 2026 reporting flagged this as the #1 confusion point: people see the TDS credit and assume they're done. They aren't.

What counts as a taxable "transfer" (more than you think)

A taxable event isn't just cashing out to rupees. Each of these is a transfer taxed at 30%: - Selling crypto for rupees (obviously) - Swapping one crypto for another — BTC to ETH is a taxable transfer of the BTC, even though no rupees changed hands - Spending crypto — paying for anything directly with crypto - Selling or gifting at a gain What is not taxable: simply buying crypto and holding it, and moving crypto between your own wallets. No transfer, no tax — until you transfer. Mining, staking, and airdrops have a two-stage treatment: the reward is taxed at your slab rate on its fair market value at the time of receipt (under Income from Other Sources), and when you later sell, the 30% applies on the sale price minus that FMV (which becomes your cost of acquisition). Gifts: if you receive crypto as a gift worth more than ₹50,000 from a non-relative, the receipt itself is taxable at your slab rate (the gift provision); when you later transfer it, the 30% applies. Gifts from specified relatives are exempt at receipt — but the later transfer is still taxed.

How to report it: Schedule VDA

For AY 2026-27 (FY 2025-26 income), crypto goes in Schedule VDA — available only in ITR-2 and ITR-3. If you have VDA income, you cannot use ITR-1 or ITR-4. The schedule requires transaction-wise reporting: date of acquisition, date of transfer, cost, and consideration for each transfer. Staking/airdrop/mining income goes under Income from Other Sources, not in Schedule VDA. Practical workflow for the 2026 filing: 1. Reconcile before filing. Match every exchange statement against your AIS and Form 26AS — the TDS your exchange deducted must appear there. Mismatches are the most common reason for crypto notices. 2. Mind the deadlines. For AY 2026-27, the July 31 / August 31 filing deadlines for non-audit cases are already past as of October 2026. What's still live: belated returns till December 31, 2026 (with fee + interest), TDS-credit reconciliation checks, and — most usefully — keeping clean FY 2026-27 records now so next year's filing is painless. 3. Foreign holdings: report in Schedule FA (foreign assets). Experts warn that undeclared foreign crypto holdings above thresholds can attract the Black Money Act — treat that as a serious warning, not a settled outcome. 4. Keep records like an auditor. Every trade's date, pair, quantity, INR value, fees, and TDS certificate. From April 2026, your exchange files its own statement of your trades (Section 509) — the department will have its own copy to compare against.

Penalties: what non-compliance actually costs

- Under-reporting (Section 270A): 50% of the tax on under-reported income; 200% if it's deliberate misreporting (concealment). Plus interest of 1% per month under the 234A/B/C provisions. - Late filing (Section 234F): up to ₹5,000 (₹1,000 if total income is ₹5 lakh or less) — and remember, belated filing for AY 2026-27 is open only till December 31, 2026. - Undisclosed crypto picked up in a search or block assessment can be taxed at up to 60% under the undisclosed-income framework. A Finance Ministry data point for perspective: in FY 2024-25, ₹511.83 crore of crypto TDS was collected — and 49% of investors had net losses (CoinCentral, February 2026, citing MoF data). The system taxes the winners' gross gains and offers the losers nothing. That asymmetry is the policy, stated plainly.

This article is for educational purposes only and is not financial advice. Please consult a SEBI-registered investment adviser for personalized guidance. Investments are subject to market risk.