Crypto / VDA Tax

Statutory basis: Section 115BBH of the Income-tax Act, 1961 (inserted by the Finance Act, 2022, effective AY 2023-24) taxes income from the transfer of a Virtual Digital Asset (VDA) — cryptocurrency, NFTs, and similar assets as notified by the CBDT — at a flat 30% rate, with no distinction between short-term and long-term holding.

Deduction and set-off restrictions: only the cost of acquisition of the VDA may be deducted in computing this income — no deduction is allowed for mining costs, transaction/gas fees, or any other expenditure. Loss from transfer of one VDA cannot be set off against income from another VDA or against any other head of income, and such loss cannot be carried forward to a subsequent year (Section 115BBH(2)).

TDS under Section 194S: a 1% TDS applies on consideration paid for transfer of a VDA. No TDS is required where the aggregate value of consideration during the financial year does not exceed ₹50,000 for a "specified person" (broadly, an individual/HUF whose business turnover does not exceed ₹1 crore or professional gross receipts do not exceed ₹50 lakh in the immediately preceding financial year, or who has no business/professional income) — for any other payer, the threshold is ₹10,000. TDS deducted under Section 194S is credited against the taxpayer's final 30% liability under Section 115BBH.

Sources: taxguru.in and quicko.com on the Section 115BBH flat-rate and loss-restriction provisions; patronaccounting.com and coinswitch.co on the Section 194S TDS thresholds (₹50,000 specified-person / ₹10,000 other) (WebSearch, 8 Sep 2026) — consistent with the ₹50,000/₹10,000 threshold already cited on this firm's live blog post on Section 194S.

Virtual digital assets — cryptocurrencies, NFTs and similar digital representations of value — have their own tax regime in India. The Income Tax Act 1961 defines virtual digital assets in Section 2(47A), and Section 115BBH taxes the income from their transfer at 30% plus surcharge and cess, with no deduction except the cost of acquisition, and no set-off of losses from virtual digital assets against other income. Transfers attract TDS under Section 194S — a resident buyer must deduct tax at 1% of the consideration when paying for a virtual digital asset (VERIFY: the rate for specified persons under Section 194S, which the CBDT has prescribed at a lower rate for non-audit individuals and HUFs).

The regime is deliberately harsh and deliberately simple: a flat 30% on gains, no deductions, no loss set-off against other income. That means the tax planning that works for shares and property — indexation, holding-period classification, loss harvesting against ordinary income — does not work for crypto. What does work is discipline: accurate cost records, correct computation of each transfer, timely TDS on purchases, and full disclosure in the return under the capital gains or other-sources heads as the position requires.

Getting crypto wrong is expensive in ways that compound. Gifts of virtual digital assets to family members are themselves taxable events under the gift provisions, exchanges of one coin for another are transfers, and a failure to deduct TDS under Section 194S makes the buyer personally liable for the tax. Undisclosed crypto gains, flagged by the department's data, invite scrutiny under the assessment framework with interest under Sections 234A to 234C.

This service is for individuals, traders and businesses dealing in virtual digital assets. We compute gains on each transfer under Section 115BBH with the correct cost basis, manage the Section 194S TDS obligations on purchases, handle the gift and exchange positions, and file the returns with the virtual digital asset income fully and accurately disclosed.