Crypto Taxation in India: Key Regulations

The government officially terms crypto assets as Virtual Digital Assets (VDAs). The tax regime is governed by Section 115BBH and has seen strict updates through 2025, emphasizing compliance and transparency.  

I. Taxation on VDA Profits

• Flat Tax Rate: Profits earned from selling, swapping, or spending VDAs are subject to a flat 30% income tax rate.  

• Total Burden: This 30% is supplemented by applicable surcharges and an additional 4% cess.  

• No Deductions/Set-Offs (Section 115BBH):

  • Deductions are strictly limited to the cost of acquisition of the asset (the original purchase price).  

  • No other expenses (e.g., transaction fees, electricity costs for mining) can be claimed as deductions.  

  • Losses from one crypto asset cannot be set off against gains from another crypto asset.

II. Tax Deducted at Source (TDS)

• TDS Rate: A 1% Tax Deducted at Source (TDS) is levied on all transfers of Virtual Digital Assets (VDAs).  

• Purpose: Introduced in July 2022 to ensure tax compliance and maintain transparency in high-volume crypto transactions.

III. Goods and Services Tax (GST) Update (July 2025)

• New Levy: An additional 18% GST is now applicable on crypto trading and service fees across platforms (covering spot, futures, and copy trading).  

• Impact: This GST is charged over and above the existing 30% flat tax and 1% TDS, significantly raising the effective tax burden for active traders.  

IV. Compliance and Future Reporting

• Mandatory Reporting (FY 2025-2026): Starting from the fiscal year 2025-2026, mandatory reporting by crypto exchanges and other designated entities will be enforced to ensure greater tax transparency.

• International Transparency (CARF): India plans to adopt the OECD’s Crypto-Asset Reporting Framework (CARF) by April 2027. This will enable automatic global data sharing on offshore wallets and exchange trades, eliminating the invisibility of foreign crypto holdings.  

• Enforcement: Tax authorities are actively investigating and uncovering hidden crypto income and assets, with significant amounts detected and seized in recent crackdowns.

V. Government Stance

• Regulation over Ban: G20 discussions, supported by India, advocate for a step-by-step regulatory framework that aligns with global standards, rather than an outright ban, to promote oversight while fostering innovation.  

• Budget Stability: The Interim Budget 2025 introduced no major changes to the existing 30% tax or 1% TDS rules, confirming the continuation of the prevailing regulations.