Section 2(47A) Virtual Digital Asset Definition: NFTs, Stablecoins and CBDC Edge Cases
s.2(47A) ITA 1961 defines a VDA as any cryptographically generated token of value — expressly including NFTs — but not Indian/foreign currency, not RBI's e-Rupee, and not notified exclusions like gift cards. Stablecoins are likely VDAs, with no express CBDT exclusion.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Under s.2(47A) of the Income-tax Act, 1961, a virtual digital asset (VDA) is any information, code, number, or token — not being Indian currency or a foreign currency under FEMA — generated through cryptographic means or otherwise, that represents value and can be traded or stored electronically, and it expressly includes NFTs and any other digital asset the Central Government notifies; excluded are Indian/foreign currency, the RBI's e-Rupee, and notified items like gift cards, loyalty points, and airline miles. Whether an asset is a VDA decides the tax section, and the section decides the rate: VDA transfers pay 30% + 4% cess under s.115BBH; non-VDAs stay under ordinary rules. Get the classification wrong and the whole return is wrong.
The statutory definition, unpacked
Section 2(47A) defines a VDA in three limbs, with three exclusions:
The wording "generated through cryptographic means or otherwise" is deliberate — it catches non-crypto digital assets the government later targets, not just blockchain tokens. The exclusions are closed lists; if an asset is not currency and not notified as excluded, it is a VDA.
What is in, what is out
The edge cases that actually decide people's tax
NFTs. An NFT is a VDA by express statutory text — s.2(47A)(b). Buying and selling an NFT is a VDA transfer: 30% + 4% cess on the gain, no holding-period split, no deduction beyond cost. A ₹30,000 gain on a digital artwork pays ₹9,360, the same rate as a Bitcoin trade. on collectible-specific nuances like creator royalties, but the classification is settled by the section's plain text.
Stablecoins. USDT and USDC are tokens generated through cryptographic means that represent value. Are they "foreign currency" and therefore excluded? No — "foreign currency" in FEMA means currency of a foreign country that is legal tender there; a stablecoin is not legal tender. On the current text they are VDAs. The uncertainty is not the definition but the absence of an express CBDT statement — treat them as VDA until a notification says otherwise. [VERIFY]
CBDC / e-Rupee. The RBI's central bank digital currency is excluded by notification under exclusion (iii). An e-Rupee transfer is not a VDA transfer — it does not attract s.115BBH. [VERIFY] the current notification reference before relying on it.
Gift cards and loyalty points. These are notified exclusions — not VDAs. A ₹10,000 gift card is outside s.115BBH. (It may still be taxable under other provisions as a benefit, but not as a VDA.)
Worked example: Sana's NFT flip
Persona: Sana, salaried, buys a digital-art NFT.
Facts:
- Buys NFT for ₹50,000 (cost of acquisition) on 10 Feb 2026.
- Sells it for ₹80,000 on 5 Jul 2026.
Step 1 — Classify. The NFT is a VDA under s.2(47A)(b). The sale is a VDA transfer under s.115BBH.
Step 2 — Compute. Gain = ₹80,000 − ₹50,000 = ₹30,000. No holding-period split; no indexation; no deduction for platform fees.
Step 3 — Tax. ₹30,000 × 30% = ₹9,000; cess 4% = ₹360 → ₹9,360.
Step 4 — TDS. If sold through a marketplace that deducts 1% u/s 194S (₹800), claim the credit; balance ₹8,560 is payable.
Step 5 — Report. Schedule VDA in ITR-2, with type "NFT", acquisition date, transfer date, consideration, and cost.
Reproduce the arithmetic in the Crypto VDA Tax Calculator.
Changed FY 2025-26: The s.2(47A) definition is unchanged since its insertion by Finance Act 2022 — the classification edge cases above are the same cases that existed at AY 2023-24. What has changed is data: NFT and stablecoin transactions now appear in AIS SFT information when routed through Indian platforms, so the department's systems classify what you trade. If you treat a stablecoin as "not VDA" in your return while the AIS flags a VDA transaction, the mismatch is visible.
Frequently asked questions
1. What is a virtual digital asset under s.2(47A)?
Any cryptographically generated token of value — including NFTs — that is not Indian/foreign currency and not a notified exclusion. Bitcoin and Ethereum are VDAs; cash and gift cards are not.2. Are NFTs taxed as VDAs?
Yes. NFTs are expressly included in s.2(47A)(b). A gain on an NFT is charged at 30% + 4% cess under s.115BBH, with no holding-period split.3. Are stablecoins like USDT and USDC VDAs?
Likely yes. They are tokens of value with no express CBDT exclusion; "foreign currency" under FEMA means legal tender, which a stablecoin is not. [VERIFY]4. Is the RBI's e-Rupee a VDA?
No. CBDC is excluded by notification under the exclusion clause. An e-Rupee transfer does not attract s.115BBH. [VERIFY]5. Are gift cards and loyalty points VDAs?
No. They are notified exclusions. A gift card may be taxable as a benefit under other provisions, but not as a VDA.6. What is the tax rate if something is a VDA?
30% plus 4% health and education cess on the gain from its transfer under s.115BBH, with only the cost of acquisition deductible.7. Where do I report an NFT sale?
Schedule VDA in ITR-2 or ITR-3, with the NFT's acquisition date, transfer date, consideration, and cost in INR.---
Last verified: 2026-08-08 (FY 2025-26 / AY 2026-27)
Sources: s.2(47A)(a)–(c) and exclusions (i)–(iii), Income-tax Act, 1961 (inserted by Finance Act 2022); s.115BBH (VDA transfer tax); FEMA 1999 s.2(m) (foreign currency definition); CBDT notifications on excluded digital assets (gift cards, loyalty points, airline miles) and on CBDC — references flagged [VERIFY]. Stablecoin classification flagged for CA verification. For a VDA computation, use the Crypto VDA Tax Calculator.
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