India’s crypto tax rules aren’t just complicated-they’re designed to make trading as painful as possible. If you’re buying, selling, or staking cryptocurrency in India, you’re not just dealing with price swings. You’re also navigating a tax system that treats your digital assets like a lottery ticket: high tax, no deductions, and zero mercy for losses.
30% Tax on Every Gain-No Loss Offsets
Since April 2022, India has taxed all cryptocurrency gains at a flat 30%. That’s not a marginal rate. That’s not a capital gains rate. That’s a flat tax, same as what you’d pay if you won the lottery. And here’s the kicker: you can’t offset losses. If you bought Bitcoin at ₹50 lakh and sold it at ₹30 lakh, you still owe tax on the ₹30 lakh you received-even though you lost ₹20 lakh. Same if you lost money on Ethereum but made a profit on Solana. The government doesn’t care. Losses don’t cancel out gains. They disappear.
This rule alone has pushed thousands of retail traders out of the market. Why report a loss if it doesn’t help? Why even bother tracking your trades if the system only punishes you for profits? Many are now using offshore exchanges to avoid the tax trap. And that’s exactly what the government didn’t want.
1% TDS on Every Trade-Even Small Ones
On top of the 30% tax, there’s a 1% Tax Deducted at Source (TDS) on every crypto transaction. That means if you sell ₹1 lakh worth of Dogecoin, ₹1,000 gets pulled out before you even see the money. This applies to every trade-whether it’s on CoinDCX, WazirX, or a peer-to-peer deal through Telegram. The buyer (or exchange) is legally required to withhold it.
But here’s the problem: TDS only works if the transaction goes through a registered platform. If you’re swapping crypto directly with a friend using TrustWallet or sending Bitcoin to a non-registered wallet, there’s no TDS. That’s a huge loophole. The government knows it. That’s why they’ve started asking exchanges: “Is 1% too high? Is it driving users away?” The answer? Yes. And they’re still figuring out what to do about it.
GST on Crypto Services-Now It’s Everywhere
Starting July 7, 2025, India slapped an 18% GST on almost every service related to crypto. Not the coins. Not the trading. The services. That includes:
- Trading fees on exchanges
- Withdrawal and deposit charges
- Staking rewards processing fees
- Wallet management
- KYC verification costs
Even if you’re just holding crypto, if you’re using an Indian platform to manage it, you’re paying GST. This rule forced every crypto exchange to register for GST-even if they made less than ₹20 lakh in revenue. That’s unheard of in India’s tax system. Normally, small businesses get a pass. Not here. Crypto platforms are classified as “Online Information and Database Access or Retrieval (OIDAR)” services, which means they’re treated like global tech giants. And now, they must issue GST invoices for every service, track every payment, and file monthly returns.
Reporting: ITR-2 or ITR-3? Schedule VDA Is Your New Best Friend
If you made crypto gains in FY 2024-25 (April 2024-March 2025), you had to file your income tax return using either ITR-2 or ITR-3. Both now include a brand-new section: “Schedule VDA” (Virtual Digital Assets). This is where you report every single sale, swap, or staking reward you made. No exceptions.
ITR-2 is for people treating crypto as an investment. ITR-3 is for traders who treat it like a business-like someone day-trading crypto full-time. The difference matters because business income can have different deductions (though crypto losses still can’t be offset). But both forms require you to list:
- Date of acquisition
- Cost price
- Date of sale
- Sale price
- Net gain or loss
And yes-you have to do this for every single transaction. No summaries. No averages. If you made 50 trades in a year, you need 50 entries. Most people use third-party tools like Koinly or CoinTracker to auto-generate this data. But even those tools can’t fix the core problem: the system doesn’t allow losses to reduce your tax bill.
What Happens If You Don’t Report?
Here’s the scary part: we don’t know exactly what penalties look like. There are no public cases of someone being fined ₹5 lakh for not reporting crypto. No headlines about a trader getting jailed. Why? Because the government hasn’t made enforcement public.
But that doesn’t mean there are no consequences. The tax department already has access to data from exchanges. Every 1% TDS deduction is recorded. Every GST invoice is tracked. Every platform is required to report user transactions to the Income Tax Department. If you didn’t report a ₹10 lakh gain but the exchange sent a TDS report showing you sold exactly that amount, the department will notice.
Penalties for underreporting income are already defined under the Income Tax Act. You could face:
- 200% of the tax evaded
- Interest at 1% per month
- Prosecution for willful evasion (if they prove intent)
And if you’re caught using fake documents or offshore wallets to hide income, the chances of a full audit skyrocket. The government doesn’t need to prove you stole money. They just need to prove you didn’t report it.
Why Enforcement Is Failing-And What’s Coming Next
India’s crypto tax system was built to scare people away, not to collect taxes. And it’s working… too well. Trading volumes have dropped 70% since 2022. Exchanges like CoinSwitch and ZebPay have laid off staff. Some have moved their servers to Dubai or Singapore. The 30% tax killed liquidity. The 1% TDS made small trades pointless. The GST on services pushed costs up for everyone.
In August 2025, the Central Board of Direct Taxes (CBDT) sent out questionnaires to every major Indian crypto platform. They asked:
- Should India create a full crypto law instead of just taxing it?
- Is 1% TDS too high?
- Does the 30% rate destroy market activity?
- Do offshore exchanges have an unfair advantage?
The answers? Yes. Yes. Yes. And yes.
That means change is coming. Maybe not this year. But by late 2026, we could see:
- A reduction in TDS to 0.1%
- Loss offset rules introduced
- Exemptions for small transactions under ₹50,000
- Recognition of crypto as a legal asset class-not a gambling product
For now, though, you’re stuck with the rules as they are. And if you’re not reporting, you’re gambling-not with crypto, but with the taxman.
What Should You Do Right Now?
If you’ve traded crypto in India since 2022, here’s your checklist:
- Export all your transaction history from every exchange and wallet you used.
- Use a tax tool to calculate gains and losses (even if losses don’t help, you need the record).
- File ITR-2 or ITR-3 with Schedule VDA completed.
- Keep proof of all purchases, sales, and fees for at least 8 years.
- If you used offshore platforms, report any income you received in INR equivalent.
Don’t wait for a notice. Don’t hope the government forgets. They won’t. And when they come knocking, you’ll wish you’d acted sooner.
Is crypto legal in India?
Yes, but not as legal tender. You can buy, sell, and hold cryptocurrency legally. The Supreme Court lifted the banking ban in 2020. However, the government doesn’t recognize it as money. It’s treated as a Virtual Digital Asset (VDA) for tax purposes only.
Do I pay tax on crypto I hold but don’t sell?
No. You only pay tax when you sell, swap, or convert crypto into fiat (like INR) or another cryptocurrency. Holding Bitcoin or Ethereum without trading doesn’t trigger a tax event. But if you earn staking rewards or airdrops, those are taxable at their fair market value when received.
Can I claim losses from crypto against my salary or business income?
No. Under Section 115BBH, crypto losses cannot be offset against any other income. Not salary, not rental income, not business profits. They can’t even be used to reduce other crypto gains. Losses are completely disallowed. This is unique to India-most countries allow loss carryforwards.
What if I use an offshore exchange like Binance or Bybit?
You’re still required to report any income you earned from those exchanges. The Indian tax department can access transaction data from Indian banks linked to your wallet. If you withdrew INR from an offshore exchange into your Indian bank account, that’s a taxable event. Not reporting it is risky-especially since the government is now working with global regulators to track cross-border crypto flows.
Is mining cryptocurrency taxable in India?
Yes. If you mine crypto, the value of the coins you receive on the day they’re mined is treated as income. You must report it at fair market value using Rule 11UA of the Income Tax Rules. If you later sell those coins, you pay 30% tax on the gain between the mining value and the sale price. Mining equipment costs are not deductible.
Dominica Anderson
Let’s be real - India’s crypto tax regime isn’t punitive. It’s *philosophical*. It says: if you’re gambling with digital assets, you don’t get to play the game of loss mitigation. That’s not policy. That’s a moral stance disguised as fiscal law. The 30% isn’t a tax - it’s a purification ritual.
Losses aren’t erased because they’re irrelevant. The state doesn’t care about your portfolio’s emotional arc. It cares about revenue. And in a country where 80% of the population still uses cash, crypto gains are the only visible, traceable, taxable form of modern wealth creation. You think this is harsh? Try living in a society where your only financial identity is your salary.
Also - 1% TDS? Pathetic. That’s less than what you pay for a coffee in Manhattan. If you’re complaining about that, you’re not a trader. You’re a tourist with a Ledger.
And don’t get me started on GST on services. Of course they taxed it. Every service that touches crypto is now a digital infrastructure node. They’re not taxing coins. They’re taxing the *architecture* of decentralization. And that’s why this is genius.
It’s not about control. It’s about redefining value. You don’t tax Bitcoin. You tax the belief in it. And if you believe hard enough? You pay. Simple.
Stop whining. Start building. Or get out.
- The state doesn’t want your money. It wants your surrender.