Cryptocurrency & Virtual Digital Assets — Tax & Legal Rules
Complete guide to cryptocurrency regulations in India — 30% tax on VDA income, 1% TDS, legal status, RBI position, SEBI developments, and reporting requirements for crypto investors.
🏛️ Background
In Union Budget 2022, India introduced a clear tax framework for Virtual Digital Assets (VDAs) through Section 115BBH and Section 194S of the Income Tax Act. While crypto is not banned in India (Supreme Court struck down RBI's banking ban in March 2020), it is also not recognized as legal tender. The government has taxed it heavily to discourage speculative trading while maintaining the option for future regulation through a dedicated crypto bill (pending).
💰 Taxation — Section 115BBH
📊 Flat 30% Tax
30% tax (plus 4% cess = 31.2%) on ANY gains from transfer of VDAs. No basic exemption applies. Applicable irrespective of income level — even ₹1 profit is taxed at 30%.
❌ No Loss Set-off
Losses from VDA transfer cannot be set off against any other income — not even against gains from other VDAs. Losses cannot be carried forward to future years.
📝 Allowed Deduction
Only cost of acquisition is deductible. No deduction for mining costs, transaction fees, internet charges, or any other expense.
🎁 Gift Tax
VDAs received as gift are taxable in recipient's hands if value exceeds ₹50,000. Cost of acquisition for the recipient = NIL (means 30% on entire value when sold).
✂️ 1% TDS — Section 194S
- ✅ Rate: 1% TDS on consideration paid for transfer of VDA.
- ✅ Threshold: ₹50,000/year (specified persons — exchanges, professionals). ₹10,000/year (others — P2P).
- ✅ Who deducts: Buyer (or exchange on behalf of buyer). Indian exchanges auto-deduct.
- ✅ Effective from: 1 July 2022.
- ⚠️ Non-compliance: If TDS not deducted, buyer becomes assessee in default. Interest @ 1%/month from date of deductibility.
⚠️ Disclaimer
This page is for educational and informational purposes only and does not constitute legal, tax, or financial advice. While we strive for 100% accuracy, laws and regulations change frequently. Always refer to the official gazette notifications, consult a qualified Chartered Accountant (CA), Company Secretary (CS), or legal professional before making any financial or legal decisions. Tenhash is not responsible for any actions taken based on this information. Last reviewed: March 2026.