# Crypto Tax in India: The Part Most People Get Wrong 🇮🇳
Most people think crypto tax in India is simple: "30% on profit, done."
It's not. And the gap between what people *think* the rule is and what Section 115BBH and Section 194S actually say is exactly why the Income Tax Department has been sending out notices. Let's break it down simply.
## 1. The flat 30% rule — and why it's not what you think
Profit from any Virtual Digital Asset (VDA) — crypto, NFTs, tokens — is taxed at a flat **30% + 4% cess (effective ~31.2%)**, under Section 115BBH. No slab rates. No benefit for long-term holding. No deduction for internet, brokerage, exchange fees, or electricity — **only your original purchase cost can be subtracted from your sale value.**
## 2. The "no netting" trap (this is the one that shocks people)
Tax is calculated **transaction-wise**, not on your overall net position. Losses on one trade **cannot** be adjusted against gains on another — not even against gains on a different crypto. And they can't be carried forward to next year either.
**Example:**
- Transaction 1: Profit ₹40,000
- Transaction 2: Loss ₹50,000
- Net position: Loss of ₹10,000
You'd assume no tax is due since you're down overall. Wrong. You still owe tax on the ₹40,000 profit:
₹40,000 × 30% = ₹12,000, plus 4% cess (₹480) = **₹12,480 payable** — even though your portfolio lost money overall. The ₹50,000 loss simply disappears for tax purposes.
## 3. Mined crypto and airdrops: taxed twice, in two different ways
If you mine crypto, receive an airdrop, or earn staking rewards, it's a two-stage tax event:
- **On receipt:** the fair market value (FMV) of the crypto on that day is taxed as regular income (business income for mining, "income from other sources" for most airdrops) at your **slab rate**.
- **On sale:** that same FMV becomes your cost of acquisition, and any gain above it is taxed at the flat **30% VDA rate**.
So if you mined crypto worth ₹50,000 (taxed at slab rate then) and later sold it for ₹80,000, you pay 30% on the ₹30,000 gain at sale — on top of the tax already paid at receipt. Mining/electricity costs are never deductible.
## 4. The 1% TDS trap — this is what's actually triggering notices
Under Section 194S, **1% TDS** must be deducted on the transaction value whenever a VDA is transferred, once you cross ₹50,000/year (₹10,000/year for non-specified persons).
- On registered exchanges, the exchange deducts and deposits this automatically.
- **On P2P trades, the buyer is responsible for deducting and depositing the TDS themselves** (against the seller's PAN) — and this is exactly what most retail buyers don't know. Missing this attracts interest, a penalty equal to the TDS amount, and in serious cases prosecution.
## 5. Where this all gets disclosed
All VDA transactions must be reported **transaction-wise** under **Schedule VDA** in ITR-2 (if treated as capital gains) or ITR-3 (if treated as business income) — with acquisition date, transfer date, cost, consideration, and resulting income for each transaction. From FY 2025-26 onward, reporting requirements have tightened further, and exchanges are required to furnish transaction statements directly to the tax department.
**Quick note:** gifted crypto is taxable in the recipient's hands (as income from other sources) if the total value from non-relatives exceeds ₹50,000/year — gifts from close relatives are exempt.
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This is general awareness content, not advice for a specific situation — actual tax treatment can vary based on how you're using crypto (investor vs. trader) and your overall transaction history.
