TaxSaral

Section 194 · was Section 115BBH in the 1961 Act

Virtual Digital Assets (Crypto) — 30%

Income from transfer of Virtual Digital Assets (VDA) — including cryptocurrency, NFTs, and digital tokens — is taxed at a flat 30% with no expense deductions (except cost of acquisition). VDA losses cannot be set off against any other income.

Who it applies to: Anyone who buys and sells cryptocurrency, NFTs, or other digital tokens on Indian or international exchanges.

Key points

  • Flat 30% rate — no slab rates, no basic exemption benefit regardless of your income level.
  • Only the cost of acquisition can be deducted — trading fees, platform fees, and other costs are not deductible.
  • VDA losses cannot be set off against salary, business income, or any other income — not even against other VDA gains in the same year.
  • 1% TDS is deducted by Indian exchanges (Section 194S) on each sale — acts as an advance tax credit.

Worked examples

1. Crypto profit and loss in the same year

Tanmay bought Bitcoin for ₹5L (profit: sold for ₹8L) and Ethereum for ₹3L (loss: sold for ₹1L) in TY 2026-27.

Bitcoin gain: ₹8L – ₹5L = ₹3,00,000
Ethereum loss: ₹1L – ₹3L = –₹2,00,000

VDA losses CANNOT be set off against VDA gains under IT Act 2025.

Tax on Bitcoin gain:
  ₹3,00,000 × 30% = ₹90,000
  Add 4% cess: ₹93,600

Ethereum loss: No benefit this year, cannot carry forward

Result: Tanmay pays ₹93,600 tax on the Bitcoin profit despite a ₹2L loss on Ethereum. The Ethereum loss is permanently lost — it cannot be used to offset other income or future crypto gains. This asymmetry makes crypto tax particularly harsh.

2. 1% TDS credit at year-end

Priya sells ₹10L worth of crypto on an Indian exchange. The exchange deducts 1% TDS = ₹10,000. Her actual profit was ₹2L.

VDA income: ₹2,00,000
Tax at 30%: ₹60,000
Add 4% cess: ₹62,400

Less TDS credit: – ₹10,000
Balance payable: ₹52,400

Result: Priya has already 'pre-paid' ₹10,000 via TDS. She owes ₹52,400 more as advance/self-assessment tax. The TDS is visible in her Annual Information Statement (Form No. 168, earlier Form 26AS) for verification at ITR filing.

Related sections

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Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative; verify with a Chartered Accountant before filing.