Question 1

What tax rate applies to gains from selling Bitcoin or other VDAs?

Accepted Answer

Under Section 115BBH of the Income-tax Act 1961 (applicable for FY 2025-26, AY 2026-27), gains from transfer of any Virtual Digital Asset as defined in Section 2(47A) are taxed at a flat 30% plus applicable surcharge and cess. No deduction is allowed except the cost of acquisition — brokerage, mining costs, and other expenses are not deductible. From TY 2026-27 onwards, the equivalent provision falls under the Income-tax Act 2025.

Question 2

Is TDS deducted when I sell crypto on an Indian exchange, and what if it was not deducted?

Accepted Answer

Yes. Section 194S requires the buyer or the exchange (as a specified person) to deduct TDS at 1% on consideration paid for transfer of a VDA exceeding Rs 50,000 in a financial year (Rs 10,000 threshold for non-specified persons). If TDS was not deducted — for example on peer-to-peer or foreign-exchange transactions — you must still report the gain and pay advance tax. Non-deduction triggers interest under Section 201(1A) on the deductor.

Question 3

Can I offset a loss on one VDA against a gain on another, or carry it forward?

Accepted Answer

No. Section 115BBH(2)(b) explicitly prohibits setting off any loss arising from transfer of a VDA against income from any other VDA or any other head of income. Losses also cannot be carried forward to subsequent years under Section 74 or any other provision. Each VDA transaction is effectively ring-fenced.

Question 4

How are crypto gifts received from friends taxed?

Accepted Answer

A VDA received as a gift is covered under Section 56(2)(x): if the aggregate fair market value of VDAs received without consideration exceeds Rs 50,000 in a year and the donor is not a relative as defined in the Explanation to Section 56(2)(x), the entire FMV is taxable as income from other sources. CBDT Circular 13/2022 clarified that FMV on the date of receipt is the relevant value. When you subsequently sell the gifted VDA, the cost of acquisition is the FMV on which gift tax was already paid.

Question 5

What records must I maintain and how do I report VDA transactions in my ITR?

Accepted Answer

You must retain transaction-level records showing date, quantity, consideration received or paid, and the exchange or wallet address for each transfer. For AY 2026-27 (FY 2025-26), Schedule VDA in ITR-2 or ITR-3 requires reporting each transaction individually. Form 26AS and AIS reflect 194S TDS credits; mismatches between your records and AIS trigger scrutiny notices under Section 143(2). We reconcile your exchange reports against AIS before filing.

Crypto / VDA Tax

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