Crypto Tax in India: 30% + 4% Cess on VDA Gains — What Salaried Employees Owe
31.2% effective tax (30% under s.115BBH plus 4% cess) applies to every VDA gain in FY 2025-26, regardless of holding period or regime, with no deduction beyond cost of acquisition. Salaried employees must pay advance tax quarterly if VDA gains push tax above ₹10,000 after TDS.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
31.2% is the effective tax on your Bitcoin or Ethereum gain in FY 2025-26 (for total income up to ₹50 lakh) — 30% under s.115BBH of the Income-tax Act, 1961, plus 4% health and education cess — charged on the full gain regardless of how long you held the coin, what salary slab you sit in, or whether you chose the old or new regime. Above ₹50 lakh total income, surcharge kicks in on the s.115BBH tax (capped at 15% by the Finance Act 2023 First Schedule for specified sections), taking the effective rate up to about 35.88%. No deduction beyond the cost of acquisition. No basic-exemption-limit shelter. No long-term or short-term split. For a salaried employee, the only real decision is the advance-tax one: if your VDA gains push your total tax after TDS above ₹10,000, you owe it in quarterly instalments, not at filing time.
The four rules that decide your crypto bill
Section 115BBH, inserted by the Finance Act 2022 and in force for every transfer from AY 2023-24 through AY 2026-27, has four structural features. Everything else is commentary:
- Flat 30%, no holding-period split. A coin held for one day and one held for five years are taxed identically. The 12.5% LTCG rate for listed equity and the 20% STCG rate never apply to VDA.
- Only cost of acquisition is deductible (s.115BBH(2)(a)). Exchange fees, gas fees, wallet charges, transfer costs — all non-deductible. Your taxable gain is sale consideration minus cost of acquisition, nothing else.
- No set-off against other income (s.115BBH(2)(b)). A crypto loss cannot reduce your salary, rental, or business income.
- No carry-forward. VDA losses die in the year they arise (s.74 does not apply to them).
The 4% cess is computed on the 30% tax, giving the 31.2% effective rate that appears on every credible calculator.
Why "regime" is irrelevant to the VDA portion
Salaried employees filing FY 2025-26 must choose between the default new regime (s.115BAC) and the old regime. That choice changes how your salary is taxed — it does not touch the VDA portion.
The VDA income is a separate block charged under a special provision. It sits on top of your slab income but is not taxed at your slab rate. That is why an employee in the 5% bracket still pays 31.2% on crypto, and an employee in the 30% bracket pays exactly the same 31.2%.
Changed FY 2025-26: No rate change — the s.115BBH framework is unchanged since AY 2023-24. What changed is enforcement: exchange transaction data now flows to most filers through the Annual Information Statement (AIS) via the SFT mechanism, and under-declared VDA gains are the specific item reconciliation flags. Separately, the new regime became the default for FY 2023-24 onward, so the "which regime" question is now an active annual choice for your salary — with zero effect on the crypto line.
Worked example: Arjun, ₹15 lakh salary + ₹3 lakh Bitcoin gain
Persona: Arjun, salaried employee, resident individual, FY 2025-26 (AY 2026-27). New regime (default). No other income.
Step 1 — Salary tax. Gross ₹15,00,000; standard deduction ₹75,000 (s.16(1a)); taxable ₹14,25,000. New-regime slabs (FY 2025-26): 0–4L nil, 4–8L 5%, 8–12L 10%, 12–16L 15%.
- ₹4,00,000 × 0% = ₹0
- ₹4,00,000 × 5% = ₹20,000
- ₹4,00,000 × 10% = ₹40,000
- ₹2,25,000 × 15% = ₹33,750
- Tax = ₹93,750; cess 4% = ₹3,750 → salary tax ₹97,500
Step 2 — VDA tax. Bitcoin gain ₹3,00,000.
- ₹3,00,000 × 30% = ₹90,000; cess 4% = ₹3,600 → VDA tax ₹93,600
Step 3 — Total and the advance-tax shortfall.
- Total tax: ₹97,500 + ₹93,600 = ₹1,91,100
- TDS deducted by employer on salary: ≈ ₹97,500
- Balance due: ₹93,600 — far above the ₹10,000 threshold → advance tax was due
If Arjun pays nothing until 31 July 2026 (filing date): s.234B interest runs at 1% per month or part from 1 April 2026 on the shortfall (₹93,600 × 1% × 4 months ≈ ₹3,744), plus s.234C interest on the deferred instalments (15 June, 15 Sep, 15 Dec, 15 Mar at 15/45/75/100%). Paying the ₹93,600 on time in four instalments avoids both.
Reproduce the arithmetic in the Crypto VDA Tax Calculator.
Advance tax for the salaried crypto holder
Advance tax is due whenever estimated total tax after TDS credit exceeds ₹10,000 — it is not enough to assume "my employer's TDS covers me." The employer's TDS covers salary; it does not know about your exchange trades.
If a sale happens late in the year, the s.234C "last instalment" safe harbour protects you: interest on the deferred portion is waived when the income arose in the final quarter and you pay 100% by 15 March. if you rely on this for a large December–March trade.
What a salaried employee must NOT assume
- "My slab is 5%, so crypto is 5%." Wrong — VDA is a flat 30% + cess, never slab.
- "I'll use the ₹1,25,000 LTCG exemption." Wrong — that exemption (s.112A) is for listed equity and equity-oriented funds only; VDA gets no exemption.
- "₹2,50,000 basic exemption / ₹87A rebate will shelter it." Wrong — those apply to slab income, not to income charged under s.115BBH.
- "The exchange's 1% TDS (s.194S) covers my liability." Wrong — 1% TDS is a credit against your 31.2% liability, not a substitute for it.
Frequently asked questions
1. What is the tax rate on crypto in India for FY 2025-26?
31.2% — 30% under s.115BBH plus 4% health and education cess — applied to the entire VDA gain regardless of holding period, tax regime, or salary bracket.2. Does the new vs old regime affect my crypto tax?
No. The regime choice changes how salary is taxed; the VDA portion is charged at a flat 30% + cess under s.115BBH in both regimes.3. Can I deduct exchange fees or transfer charges from my gain?
No. Only the cost of acquisition is deductible under s.115BBH(2)(a). Fees, gas, and wallet charges are not.4. When must I pay tax on crypto as a salaried employee?
In quarterly advance-tax instalments if your total tax after employer TDS exceeds ₹10,000 — typically when VDA gains exceed roughly ₹32,000 (₹10,000 ÷ 31.2%). Otherwise as self-assessment tax before filing.5. Is the exchange's 1% TDS my final tax?
No. The 1% TDS under s.194S is a credit against your 31.2% liability. After credit, the balance is payable as advance tax or self-assessment tax.6. Which ITR form do I file with crypto income?
ITR-2 or ITR-3 — never ITR-1. Report each transfer in Schedule VDA, and claim the exchange's 1% TDS credit against the s.115BBH liability.7. What happens if I don't pay advance tax on crypto?
Interest under s.234B at 1% per month from 1 April of the assessment year on the unpaid shortfall, plus s.234C interest on late instalments.---
Last verified: 2026-08-08 (FY 2025-26 / AY 2026-27)
Sources: s.115BBH and s.115BBH(2)(a)–(b), Income-tax Act, 1961 (inserted by Finance Act 2022); s.2(47A) (VDA definition); s.194S (1% TDS); s.234B/234C (advance-tax interest); s.16(1a) (standard deduction); s.112A (LTCG exemption on listed equity — not applicable to VDA); CBDT Circular 13/2022 (s.194S operational mechanics); SFT reporting of VDA transactions by exchanges (Rule 114E). Thresholds, rates, and dates verified against FY 2025-26 rules. For a personal VDA computation, book a consultation at harunraaj.com.
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