Crypto and VDA tax India 2026: 30% flat rate, Schedule VDA, TDS, and what you can't offset

India's Virtual Digital Asset (VDA) tax regime, introduced by the Finance Act 2022 and effective from AY 2022-23, is one of the most restrictive crypto tax frameworks globally. The 30% flat rate with no deductions and no loss offsets has remained unchanged through Budget 2025 and applies to AY 2026-27 without modification.

This guide covers everything you need to file correctly: what counts as a VDA, which events are taxable, how the 30% applies, TDS mechanics, Schedule VDA in ITR-2, and the most common mistakes.

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What is a Virtual Digital Asset (VDA) under Indian law?

Section 2(47A) of the Income Tax Act defines a VDA as any information, code, number, or token generated through cryptographic means that can be transferred, stored, or traded electronically.

Covered:

• Bitcoin (BTC), Ethereum (ETH), and all cryptocurrencies
• Non-fungible tokens (NFTs)
• DeFi tokens
• Exchange tokens (BNB, etc.)
• Stablecoins (USDC, USDT, DAI)
• Any token issued through a blockchain

Explicitly excluded:

• Indian currency (INR)
• Foreign currencies
• Gift cards
• Loyalty reward points (airline miles, credit card points)

Key implication: Stablecoins like USDT are VDAs. Trading USDT for USDC is a VDA-to-VDA swap — a taxable event with the same rules as a BTC trade.

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Section 115BBH: the flat 30% regime

Section 115BBH governs income from VDA transfers. The rules are absolute:

Rate: 30% (plus 4% cess = 31.2% effective; plus surcharge for high incomes)

No deductions: No deduction for:

• Cost of mining equipment or electricity
• Exchange fees or gas fees
• Advisory or management fees
• Any expense whatsoever beyond the cost of acquisition

One exception to the "no deductions" rule: The cost of acquisition (what you paid for the VDA) is deductible from the sale proceeds to arrive at the gain. Cost of acquisition includes the actual purchase price. Nothing else.

No loss offsets — at all:

• VDA losses cannot offset VDA gains (even within the same year)
• VDA losses cannot offset equity capital gains
• VDA losses cannot offset salary income
• VDA losses cannot be carried forward to next year

This last point is the most punishing aspect of the Indian regime. In most countries, crypto losses can at least offset crypto gains within the year. In India, each profitable trade is fully taxed; each loss trade is ignored.

No slab benefit: Even if your total income is below ₹7 lakh and you would normally pay zero tax under the new regime, VDA gains are taxed at 30% — the slab rate rebate (Section 87A) does not apply to VDA income.

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Every taxable event: the complete list

1. Selling VDA for INR

Selling Bitcoin, Ethereum, or any crypto for Indian rupees on an Indian exchange or abroad.

Gain = Sale proceeds (INR) − Cost of acquisition (INR)

2. Selling VDA for USD or any foreign currency

If you sell crypto for USD through an international exchange (Binance, Coinbase, Kraken), convert the USD sale proceeds to INR at the exchange rate on the date of sale. That INR amount is your sale consideration.

3. Swapping one VDA for another

BTC → ETH, ETH → SOL, USDT → USDC — all are taxable. Each swap is a deemed sale of the first VDA at its FMV on the swap date, and a deemed purchase of the second at the same FMV.

4. Using crypto to buy goods or services

Paying for services or goods with Bitcoin is a VDA transfer — taxable at the FMV on the date of payment.

5. Receiving crypto as income

• Salary in crypto: taxed at slab (not 30%) in the year of receipt; cost basis for future sale = FMV at receipt
• Freelance/professional income in crypto: same — slab rate on FMV at receipt
• Mining rewards: FMV at receipt taxed as "income from other sources" at slab; future sale gain taxed at 30%
• Staking rewards: FMV at receipt is debated — most practitioners treat it as income at slab when received; future gain at 30%

6. Airdrops

FMV at the time the airdropped tokens are received is income at slab rate. Future sale gain is at 30%.

7. Hard forks

Coins received from a hard fork: FMV at receipt treated as income (slab); future gain at 30%.

8. Gifting VDA

Giving VDA as a gift: the donor recognises a transfer at FMV (taxable gain if FMV > cost). The recipient takes FMV at gift date as their cost basis. Gift received from non-relatives above ₹50,000 FMV: taxable as gift income at slab for the recipient.

9. NFT sale or transfer

NFTs are VDAs. Selling an NFT you created: FMV at sale − cost of creation. Selling an NFT you purchased: FMV at sale − purchase price.

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Cost basis methods: FIFO, LIFO, or specific identification?

The Income Tax Act does not specify a particular cost basis method for VDAs. Practically:

Most defensible approach: FIFO (first-in, first-out) — the oldest purchased coins are deemed sold first. This is the default method used by most Indian tax practitioners.

Specific identification: If you can specifically identify which coins you are selling (through exchange records), you can use specific identification to optimise tax (sell highest-cost lots first to minimise gain). Maintain documentation — transaction IDs, timestamps, cost records.

LIFO (last-in, first-out): Used in some countries; not standard in India. Riskier to defend.

Practical problem: Most traders who have moved assets across multiple wallets, used DeFi protocols, or traded across years have cost basis tracking that is approximate at best. Use a crypto tax tool (Koinly, CoinTracker, Coinledger) to maintain complete records. The AIS will show the total sale proceeds from Indian exchanges — if your ITR cost basis does not reconcile, expect a notice.

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Section 194S: TDS on VDA transfers

Section 194S (effective July 1, 2022) requires TDS at 1% of the consideration on every VDA transfer.

Who deducts TDS

Indian exchanges (CoinDCX, WazirX, Zebpay, CoinSwitch, Mudrex): The exchange automatically deducts 1% TDS on every trade and deposits it to the government. You don't need to do anything — it appears in your AIS and Form 26AS.

P2P trades between individuals: If both parties are individuals, the buyer must deduct 1% TDS on the amount paid and deposit via Form 26QE (challan-cum-statement).

Transactions on foreign exchanges (Binance, Coinbase, Kraken): No TDS is deducted at source since the exchange is not an Indian entity. You are personally responsible for reporting and paying the applicable tax via advance tax or self-assessment.

TDS credit

The 1% TDS deducted by exchanges is fully creditable against your tax liability. In your ITR:

• Your total VDA tax liability: 30% on total gains
• Less: TDS already deducted (from 26AS/AIS)
• Net payable: the difference

When TDS exceeds actual tax: High-volume traders who have losses or thin margins may find that 1% TDS per trade exceeds their actual 30% liability on gains. They receive a refund via ITR.

TDS exemption threshold: For transactions between individuals where the total consideration does not exceed ₹50,000 in a financial year (₹10,000 if the buyer is a specified person), TDS under Section 194S is not required.

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Foreign exchange trading: Binance, Coinbase, Kraken

Trading on international exchanges creates the same Indian tax liability — the 30% VDA tax applies to your worldwide VDA gains as an Indian resident. The difference:

1. No TDS deducted by foreign exchanges
2. You must pay advance tax on foreign exchange VDA gains
3. No automatic AIS entry from foreign exchanges — but AIS may still capture inbound bank transfers from these exchanges through SWIFT data

Bank wire reconciliation: When you withdraw from Binance to your Indian bank, the wire transfer appears in your AIS. If you haven't declared the corresponding VDA gains, this creates a mismatch flag. Ensure gains are reported in Schedule VDA.

Converting foreign exchange gains to INR: Use the SBI TTBR rate on each transaction date.

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Schedule VDA in ITR-2 (AY 2026-27)

Schedule VDA was introduced in AY 2023-24. It captures VDA income separately from other capital gains.

Where to find it: ITR-2 → Schedule VDA (appears after Schedule CG)

What to enter:

Column	What to enter
Head of income	Transfer of VDA
Date of acquisition	Date you purchased the VDA
Cost of acquisition	Purchase price in INR
Date of transfer	Date of sale/swap/transfer
Full value of consideration	Sale proceeds in INR
Net income chargeable at 30%	Sale proceeds − Cost of acquisition

Multiple transactions: Each separate VDA transaction (or summarised by coin if using a tax tool export) is entered separately. Most tax tools generate a Schedule VDA-compatible CSV.

Tax computation: Schedule VDA income flows to the tax computation at 30% flat. It does NOT flow through Schedule CG (capital gains schedule) — it is treated separately. Do not put VDA income in Schedule CG.

Aggregating across exchanges

If you traded on multiple Indian exchanges and one foreign exchange, aggregate all transactions:

1. Indian exchanges: use exchange-provided trade history; TDS from 26AS
2. Foreign exchanges: use your own records; compute INR equivalents
3. Combine into a single Schedule VDA summary
4. Total tax = 30% of net VDA gains (where gains cannot be reduced by losses)

Important: Because losses cannot offset gains, if you have 5 profitable trades (₹10L total gain) and 3 loss trades (₹3L total loss), your taxable VDA income is ₹10L — not ₹7L. The losses are ignored.

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DeFi, staking, and lending: the grey areas

Indian tax law has not issued specific guidance on every DeFi activity. Current practitioner positions:

Liquidity pool deposits (providing liquidity to Uniswap, etc.): Depositing tokens into a liquidity pool is a debated event. Some treat it as a transfer (taxable); others treat it as a non-event until withdrawal. Safest position: treat as a taxable transfer at FMV when deposited; new cost basis at FMV.

Staking rewards: FMV at time of receipt treated as income (slab rate); taxed at 30% on future sale gain. The staking act itself is not a taxable transfer.

Yield farming / liquidity mining rewards: Same as staking — receipt is income at slab; sale gain at 30%.

Crypto lending: Lending crypto to a protocol and receiving interest: interest is income at slab rate. The original principal, when returned, may or may not create a gain depending on price movement.

Wrapped tokens (wBTC → BTC): Wrapping is arguably a VDA transfer; unwrapping likewise. Conservative position: both are taxable events at FMV. Practical position taken by many: treat as non-events if it's the same economic exposure.

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USDT and stablecoin trading: the hidden tax trap

Many traders use USDT or USDC as a "parking" currency between trades, treating it as equivalent to holding cash. Under Indian law, USDT is a VDA.

Trap scenario:

• Buy BTC for ₹1,00,000
• BTC rises to ₹1,20,000; sell BTC → receive USDT
• USDT is worth ₹1,20,000 at time of receipt (pegged to USD)
• Buy ETH with USDT
• ETH falls; sell ETH for ₹1,10,000 USDT

Tax outcome:

• BTC → USDT: gain ₹20,000, tax ₹6,000 (30%)
• USDT → ETH: USDT cost basis is ₹1,20,000; no gain if USDT stable
• ETH → USDT: loss ₹10,000 — cannot offset the ₹20,000 BTC gain
• Net tax: ₹6,000 on BTC gain; ₹0 credit for ETH loss

Every BTC-to-USDT and USDT-to-altcoin swap is a separate taxable event.

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Advance tax for crypto traders

If your VDA trading generates gains during the year and TDS does not cover 100% of your liability (which it won't for foreign exchange traders), pay advance tax:

Deadline	% of annual tax due
June 15	15%
September 15	45%
December 15	75%
March 15	100%

Estimating advance tax: After each significant profitable trade, estimate the cumulative gain for the year and pay accordingly. The 30% rate makes calculation simple — if cumulative gains are ₹5L, tax is ₹1.5L, and you owe instalments of ₹22,500 (15%), ₹67,500 (45%), etc.

Failure to pay advance tax triggers Section 234B and 234C interest (1% per month on the shortfall).

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AIS and crypto: what the taxman already knows

The Annual Information Statement (AIS) receives data from:

• Indian exchanges: Transaction-by-transaction reporting under Section 285BA
• Banks: Inbound wires from foreign exchanges (e.g., Binance withdrawal to SBI)
• Credit card companies: Crypto purchases via card (less common)

AIS shows:

• Total sale consideration from Indian exchanges (by exchange)
• TDS deducted (Form 26AS Part F, Section 194S)
• Large inbound wires that may correspond to foreign exchange withdrawals

What AIS does not show (yet):

• Individual foreign exchange trades
• Wallet-to-wallet transfers
• DeFi activity

The risk: if AIS shows ₹50L in sale proceeds from CoinDCX but your ITR shows much lower VDA income (or none), expect a notice. AIS data from exchanges is gross proceeds — you still deduct cost of acquisition to arrive at gain. But you must report the gross proceeds in Schedule VDA and show the cost basis.

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ITR-2 filing checklist for crypto / VDA income

• Download trade history from all Indian exchanges for the full financial year (April–March)
• Download trade history from all foreign exchanges for the full year
• Use a VDA tax tool (Koinly, CoinTracker, Coinledger) or spreadsheet to compute gain/loss per trade
• Note: losses cannot offset gains — compute total positive gains only
• Verify TDS entries in AIS (Form 26AS Part F) match exchange-deducted TDS
• Report all VDA income in Schedule VDA (not Schedule CG)
• Pay advance tax if TDS not covering full liability (especially for foreign exchange trades)
• File Form 67 for any foreign crypto taxes paid (rare — most jurisdictions don't withhold on crypto for non-residents)
• Disclose foreign exchange accounts and crypto wallets? — CBDT has not yet issued specific guidance requiring Schedule FA disclosure for crypto wallets (as of 2026); however, if the crypto is held through a foreign entity or custodian with a formal account, disclose it
• Report staking/mining/airdrop income in "Income from Other Sources" at slab rate
• Do not claim any expense deductions (no exchange fees, no gas fees deductible)