Overview of tax regulations in India
For the financial year 2024-2025, Indian tax law treats cryptocurrencies as virtual digital assets (VDAs) under the Income Tax Act, 1961. Section 2(47A) spells out what that means: Any code, number, token or piece of information created through cryptography counts as a VDA. The only exception is money itself — Indian rupees or any other country’s fiat currency.
VDAs include cryptocurrencies like Bitcoin (BTC) and Ether (ETH), as well as non-fungible tokens (NFTs) and similar digital tokens. While it is legal to buy, sell and hold VDAs, they are not recognized as valid payment methods.
In other words, crypto operates in a legally ambiguous space in India in 2025. It is permitted but closely monitored for taxation and anti-money laundering (AML) purposes.
Several agencies in India oversee crypto transactions. The Income Tax Department enforces tax compliance, guided by the Central Board of Direct Taxes (CBDT) under the Ministry of Finance, which sets tax policies.
Meanwhile, the Financial Intelligence Unit (FIU-IND) ensures platforms meet AML standards, while the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) shape broader regulatory policies.
These bodies work together to oversee crypto taxation in the country.
The Income Tax (No. 2) Bill, 2025, received presidential assent on Aug. 22, 2025, thereby replacing the Income Tax Act, 1961.
Taxable events for crypto traders in India
India places crypto transactions under a specific tax framework, with a flat 30% tax on gains from transfers and a 1% tax deducted at source (TDS) applied to all transfers, whether profitable or not.
A taxable event in crypto is any activity that creates a tax liability under Indian law. This includes transactions that produce income, gains or measurable benefits in fiat money. If you trade or invest, knowing what counts as a taxable event is key to staying compliant with the Income Tax Act.
Key taxable events include:
- Trading: Exchanging crypto for another crypto or fiat currency is taxable.
- Staking rewards: Counted as income when received.
- Airdrops and hard forks: Treated as income once tokens are credited.
- Mining income: Taxed as income, with later sales subject to capital gains tax.
- Payments in crypto: Considered taxable business or professional income.
Non-taxable events include holding digital assets without selling or transferring crypto between personal wallets. Because these actions do not produce income or gains, they are not subject to tax.
Did you know? Indian law offers no tax relief if you lose your crypto due to theft or hacks. Non-compliance can attract penalties, interest and prosecution for willful evasion.
Crypto tax rates and classifications
In India, income from cryptocurrencies is primarily categorized as either business income or capital gains. If trading is regular and systematic, the earnings are taxed as business income under standard income tax slabs. For most individual investors, profits from buying and selling cryptocurrencies are considered capital gains.
As of Aug. 22, 2025, both short-term capital gains (STCG) and long-term capital gains (LTCG) on VDAs are taxed at a flat 30% rate under Section 115BBH.
This rule is applicable regardless of how long the assets are held. No deductions, except the cost of acquisition, are permitted, and losses from one VDA cannot be offset against another or carried forward.
Business income from crypto is taxed at slab rates but often faces a similar tax burden due to the flat 30% rate for VDAs.
Additionally, a 1% TDS is applied to all crypto transfers above a certain threshold to ensure transparency and compliance across platforms. This includes trades on centralized exchanges and peer-to-peer (P2P) transactions.
TDS on VDAs in India
India’s tax framework for cryptocurrencies includes a 1% TDS under Section 194S. This mandatory deduction applies to most VDA transactions and was introduced to improve compliance and monitor the expanding crypto market. The main aspects of crypto TDS are:
- TDS mechanism: When purchasing a VDA, the buyer deducts a fixed percentage of the sale amount as TDS and deposits it with the government. This deducted amount is the tax withheld from the seller’s payment.
- TDS rate and threshold: Section 194S imposes a 1% TDS on the sale amount if transactions exceed 50,000 Indian rupees in a financial year. In certain cases, this threshold is lowered to 10,000 rupees.
- TDS for non-cash transactions: If a buyer purchases a VDA using another VDA (non-cash payment), they must deduct 1% TDS in cash, based on the sale value, and submit it to the government.
- Mixed payment…
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