Crypto Tax India 2026: The Flat 30% Rule, 1% TDS, and Why Losses Can't Offset Gains (Section 115BBH)

By Nitish Bharadwaj · Published Jul 17, 2026 · 6 min

Cryptocurrency and other Virtual Digital Assets are taxed unlike anything else in Indian tax law: a flat 30% rate under Section 115BBH on every rupee of gain, with no benefit for long-term holding, no deduction beyond purchase cost, and no set-off allowed — not against salary or stock gains, and not even against a loss on a different cryptocurrency in the same year. A 1% TDS under Section 194S applies on most transfers above ₹50,000 annually. This guide covers the tax math, TDS thresholds, and reporting VDA income under Schedule VDA for AY 2026-27.

Every other capital-gains guide on this site walks through a two-rate system — a lower rate for holding long, a higher one for selling quick, with exemption thresholds and loss set-offs built in. Crypto and other Virtual Digital Assets get none of that. Section 115BBH taxes every rupee of gain at a flat 30%, with loss restrictions that catch out even traders who've filed returns for years.

The Flat 30% Rate — No Holding Period, No Exemption

Section 115BBH, inserted by the Finance Act 2022 and effective from April 1, 2022 (FY 2022-23 onwards), taxes income from the transfer of Virtual Digital Assets — cryptocurrency, NFTs, and other notified digital assets — at a flat 30%, plus applicable surcharge and 4% health and education cess. Unlike equity shares or mutual funds, there's no distinction between short-term and long-term holding: sell after one day or five years, the rate is identical. There's also no basic exemption threshold like the ₹1.25 lakh available on long-term equity gains — the very first rupee of VDA profit is taxed at 30%. The only deduction permitted is the cost of acquiring the asset; expenses like exchange fees, gas fees, or any other transaction cost cannot be deducted.

The Rule That Surprises Even Experienced Traders: No Set-Off, No Carry Forward

Section 115BBH(2) blocks loss set-off far more aggressively than the rules governing stocks or mutual funds. A loss on one Virtual Digital Asset cannot be set off against a gain on a different one — sell Bitcoin at a ₹1.5 lakh profit and Ethereum at an ₹80,000 loss in the same year, and you still owe 30% tax on the full ₹1.5 lakh Bitcoin gain; the Ethereum loss is simply ignored for tax purposes. VDA losses also cannot be set off against any other income category — salary, rental income, or capital gains from stocks and mutual funds — and unlike a capital loss on shares, which can be carried forward for up to 8 assessment years, a VDA loss cannot be carried forward at all. Once the financial year ends, an unset-off crypto loss is gone for tax purposes.

The 1% TDS Under Section 194S

Separately from the 30% tax on gains, Section 194S requires whoever pays the consideration — typically the crypto exchange, on your behalf, when you sell — to deduct 1% TDS on the sale value at the time of the transaction. The obligation to deduct kicks in once your transactions with a given payer cross ₹50,000 in a financial year for most individual and HUF taxpayers ('specified persons' not subject to tax audit), and a lower ₹10,000 threshold for other taxpayers, including those with business turnover above the tax-audit limit. This 1% is not an additional tax — it's an advance credit against your final 30% liability, adjustable when you file your return, and refundable if your total TDS deducted exceeds what you actually owe.

Reporting VDA Income: Schedule VDA

For FY 2025-26 (AY 2026-27), every transaction involving a Virtual Digital Asset must be reported separately in Schedule VDA within your income tax return — you cannot simply net your total profit into one figure. Depending on whether your crypto activity is treated as capital gains or business income, you'll file ITR-2 or ITR-3 respectively; our complete ITR filing guide for AY 2026-27 covers which form fits your overall income profile beyond just crypto. Every buy and sell pair needs its own entry with dates, consideration, and cost of acquisition — exchanges typically provide a downloadable transaction report to make this easier, but the reporting obligation and its accuracy remain yours.

A Worked Example

An investor sells Bitcoin for a ₹2 lakh gain and, in the same financial year, sells Ethereum at a ₹50,000 loss. Under Section 115BBH, the Ethereum loss cannot reduce the taxable Bitcoin gain — tax is owed on the full ₹2 lakh at 30%, plus applicable cess, coming to roughly ₹62,400. Compare that to an equity mutual fund investor with the identical ₹2 lakh gain and ₹50,000 loss profile — see our capital gains tax guide for mutual funds for the full LTCG/STCG mechanics — where the loss offsets the gain, leaving ₹1.5 lakh taxable, and if held long-term, the first ₹1.25 lakh of that is fully exempt, leaving just ₹25,000 taxed at 12.5%. The structural gap between the two regimes, not just the headline rate, is what makes VDA taxation meaningfully harsher than it first appears.

This flat, no-set-off treatment has stayed unchanged since Section 115BBH's introduction, with no relief announced in Budget 2025 or since — for a full picture of how crypto gains sit alongside other special-rate income under the new regime, see our Section 87A rebate and capital gains guide, which explains why the ₹12 lakh new-regime rebate doesn't reach special-rate gains like these either. Online gaming winnings follow a strikingly similar structure — a flat 30% rate with no loss set-off — under a separate pair of provisions, Sections 194BA and 115BBJ.