Crypto Taxation in India: A Compliance-Focused Guide for VDA Investors
Cryptocurrency taxation in India is now governed through the framework of Virtual Digital Assets. The term is wide enough to cover crypto tokens, NFTs and similar digital assets that are transferable, storable or tradeable electronically. Indian currency and foreign currency are excluded from this definition.
The core tax rule is simple but strict: income from transfer of VDAs is taxable at 30%, with deduction allowed only for cost of acquisition. Losses from VDA transfer cannot be set off against other income and cannot be carried forward. This makes VDA taxation materially different from normal capital gains reporting.
The second compliance layer is 1% TDS. Under Section 194S of the Income-tax Act, 1961, TDS applies on payment to a resident for transfer of a VDA, subject to thresholds of ₹10,000 and ₹50,000 depending on the payer category. Under the Income-tax Act, 2025 framework, Section 393 continues the VDA TDS mechanism.
From a compliance perspective, taxpayers should not treat exchange reports as final tax computation. A proper VDA file should include token-wise purchase cost, transfer value, wallet records, exchange ledgers, TDS details, bank entries and valuation support. For accurate reporting, taxpayers should consider crypto and VDA ITR filing with Schedule VDA reconciliation.
Where the issue relates to TDS on crypto/NFT transfers, VDA TDS and Form 141 compliance becomes relevant. Where old crypto income has not been disclosed, ITR-U filing for missed crypto income may be examined, subject to eligibility.
The compliance risk is increasing because crypto-asset reporting obligations have been introduced for prescribed reporting entities, and specified VDA activities are already covered under the PMLA framework.
Practical takeaway: crypto profits are taxable, crypto losses have limited utility, and incomplete reporting can lead to mismatch notices, reassessment and scrutiny.
