Cryptocurrency taxation in India is governed by Section 115BBH of the Income Tax Act, 1961 and applies from FY 2022–23 onwards. With increased scrutiny, data sharing by exchanges, and mandatory disclosures in ITR, understanding how crypto tax is calculated has become essential for investors and traders. Even small or occasional transactions can create tax liability if not reported correctly.
Applicable Tax Rate
Income from the transfer of Virtual Digital Assets (VDAs), including cryptocurrencies and NFTs, is taxed at a flat 30%. This rate applies irrespective of your income slab.
In addition to the 30% tax, applicable surcharge and 4% health and education cess are levied. No basic exemption limit is available, and no deductions are allowed except the cost of acquisition of the crypto asset.
What Is Taxable?
Any transfer of crypto is considered a taxable event. This includes
• Sale of crypto for INR
• Crypto-to-crypto exchange
• Using crypto to buy goods or services
• Receiving crypto as a gift, which is taxable in the recipient’s hands (subject to exemptions)
Even if you do not receive INR, tax is calculated based on the fair market value of the crypto involved.
How to Calculate Crypto Tax
Although the tax rate is fixed, crypto tax must be calculated transaction-wise. Each transfer is taxed independently.
The basic method is simple:
• Taxable Income = Sale Value – Cost of Acquisition
• Tax Payable = 30% of taxable income + 4% cess
Example 1: Simple Sale
You bought Bitcoin for ₹2,00,000 and later sold it for ₹3,50,000.
• Profit earned: ₹1,50,000
• Tax @30%: ₹45,000
• Health & Education Cess @4%: ₹1,800
Total tax payable = ₹46,800
Example 2: Crypto-to-Crypto Exchange
You purchased ETH for ₹1,00,000 and later exchanged it for BTC valued at ₹1,40,000.
Taxable profit = ₹40,000
Even though no INR was received, the exchange itself is treated as a taxable transfer.
Important Points to Remember
• Crypto losses cannot be set off against any income
• Losses cannot be carried forward
• Each transaction is taxed separately
• 1% TDS may be deducted by exchanges and adjusted in the ITR
Reporting in ITR
Crypto income must be reported under Schedule VDA in the Income Tax Return. Details such as acquisition cost, sale value, and TDS should match Form 26AS and AIS. Accurate reporting helps avoid notices and ensures smooth compliance.