Crypto Tax in India: 30% Flat, No Loss Offset, and a Market That Moved Offshore
Section 115BBH taxes crypto gains at 30% with zero loss set-off — not against other crypto profits, not against any income. Here is why this framework is uniquely punishing and what Indian traders must know.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
India's Virtual Digital Asset (VDA) tax framework — introduced through Finance Act 2022 via Section 115BBH — is simultaneously the clearest statement of policy intent and the most obvious example of a tax framework designed for a desired outcome rather than revenue efficiency or market development.
The stated intent: bring crypto transactions within the tax net while discouraging speculative activity. The framework achieves the second goal at the direct cost of the first.
Section 115BBH: the mechanics
- 30% flat tax on income from VDA transfers — regardless of holding period, regardless of income slab
- No deduction permitted other than cost of acquisition
- No loss set-off under any provision of the Act — not intra-head, not inter-head, not carried forward to future years
- 1% TDS under Section 194S on consideration exceeding ₹50,000 (₹10,000 for specified persons)
The loss offset problem — explained simply
You made ₹5 lakh profit on Bitcoin but lost ₹4 lakh on an altcoin in the same year. Net position: +₹1 lakh.
Under Section 115BBH, your taxable income is ₹5 lakh — not ₹1 lakh. The ₹4 lakh loss is unrecoverable. Not against other crypto profits. Not against capital gains from stocks. Not against any income. Forever gone.
A trader who net-breaks-even on the year still owes 30% on their gross winning trades. This is unlike any other asset class in India.
The revenue paradox
A 30% rate with no loss offset benefits the government only when the market rises. When it falls, investors get no relief. Total crypto tax revenue has been modest relative to the policy's stated ambitions — because the policy drove activity offshore rather than into the formal system.
The market response
Indian crypto exchange volumes fell 50–70% after Budget 2022. WazirX, CoinDCX, and other domestic exchanges documented dramatic drops. Indian traders moved to offshore, non-KYC platforms. The policy succeeded in reducing regulated exchange volumes; it did not reduce crypto activity — it moved it underground.
The international comparison
Most major economies — US, UK, Germany, Singapore — treat crypto as a capital asset with full loss set-off. Germany provides long-term holding exemptions. India's framework has no peer in punishingness among developed economies.
Filing correctly if you trade or hold crypto
Crypto tax compliance requires tracking every transaction: entry price, exit price, fees, exchange-to-exchange transfers, and TDS from Form 26AS. Common mistakes: not reporting small trades as taxable events, not claiming TDS credits, and not tracking cost basis across multiple wallets and exchanges.
Talk to HRA about crypto tax computation and [ITR filing](/contact).
Frequently Asked Questions
What is the tax rate on cryptocurrency in India?
All gains from Virtual Digital Assets (VDAs) — including cryptocurrency, NFTs, and tokens — are taxed at a flat 30% under Section 115BBH of the Income Tax Act, 1961, plus applicable surcharge and 4% health and education cess. No slab benefit applies regardless of total income.
Can I set off crypto losses against other income?
No. Section 115BBH(2) explicitly prohibits setting off losses from VDA transfers against any other income, including other VDA gains. A loss on Bitcoin cannot offset a gain on Ethereum in the same year. Losses also cannot be carried forward to future years.
What is TDS on crypto transactions?
Section 194S requires the buyer (or exchange) to deduct TDS at 1% on consideration paid for any VDA transfer exceeding ₹10,000 in a financial year (₹50,000 for specified persons). This was introduced from 1 July 2022.
Are crypto-to-crypto swaps taxable?
Yes. Every transfer of a VDA — including swapping one cryptocurrency for another — is a taxable event under Section 115BBH. The fair market value at the time of transfer determines the consideration, and the 30% flat rate applies to the computed gain.
Can I deduct any expenses from crypto gains?
The only deduction allowed under Section 115BBH is the cost of acquisition of the VDA. No deduction is allowed for mining costs, electricity, transaction fees, gas fees, or any other expenditure incurred in connection with the transfer.
I'm CA Harun Raaj, Visakhapatnam. If any of this affects you or your business, reach out — I'd be glad to help.
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See Also
Frequently Asked Questions
What is the 30% flat tax on cryptocurrency in India and how is it calculated?+
Section 115BBH of the Finance Act 2022 imposes a 30% flat tax on income from Virtual Digital Asset (VDA) transfers, regardless of holding period or the taxpayer's income slab. The tax applies to the gross proceeds from VDA transfers with deductions permitted only for the cost of acquisition.
Can I offset crypto losses against other income or capital gains in India?+
No. Section 115BBH explicitly prohibits any loss set-off. Losses from VDA transactions cannot be set off against other crypto profits (intra-head), against capital gains from stocks or other assets (inter-head), or carried forward to future years. This applies regardless of whether you net break-even across all trades in a year.
Why did crypto trading volumes drop in India after the 2022 budget?+
According to the article, Indian crypto exchange volumes fell 50–70% after Budget 2022 following the introduction of Section 115BBH. The punitive tax framework — combining a 30% flat rate with no loss offset — incentivized traders to move activity to offshore, non-KYC platforms rather than use domestic regulated exchanges like WazirX and CoinDCX.
What is the TDS rate on cryptocurrency transactions in India?+
Section 194S mandates 1% Tax Deducted at Source (TDS) on VDA transaction consideration exceeding ₹50,000, or ₹10,000 for specified persons. This applies to cryptocurrency transfers and must be tracked for compliance.
How does India's crypto tax compare to other countries like US and UK?+
Unlike most major economies including the US, UK, Germany, and Singapore which treat crypto as a capital asset with full loss set-off, India's Section 115BBH framework has no peer in punishingness among developed economies. Germany even provides long-term holding exemptions, whereas India imposes a flat 30% rate with no relief provisions.
Can I deduct trading fees and transaction costs from my crypto tax in India?+
Section 115BBH permits deductions only for the cost of acquisition of the VDA. While the article indicates comprehensive transaction tracking is required (including fees and exchange-to-exchange transfers), deductions are limited to the acquisition cost, not ancillary transaction expenses.
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