India

India introduced a dedicated Virtual Digital Assets (VDA) tax regime with effect from 1 April 2022 under the Finance Act 2022. The framework is among the most explicitly codified crypto tax regimes globally — and one of the harshest. The Central Board of Direct Taxes (CBDT) administers the regime, which establishes a flat 30% tax rate on all VDA gains, a 1% Tax Deducted at Source (TDS) on every qualifying disposal, and a complete prohibition on loss offsetting. Regulatory oversight of crypto exchanges sits with the Financial Intelligence Unit (FIU) under AML/KYC obligations introduced in 2023. The regime is clear in its rules and thorough in its enforcement infrastructure — there is little interpretive ambiguity, but the economic terms are severe.

Core Tax Treatment

All gains from the transfer of Virtual Digital Assets — including cryptocurrency, NFTs, and other digital tokens — are taxed at a flat 30% plus a 4% health and education cess, producing an effective rate of 31.2%. This rate applies uniformly regardless of holding period, asset type, transaction size, or the investor's total income. There is no concessional rate for long-term holdings, no annual exemption, and no basic income threshold below which the 30% rate is reduced.

Crypto-to-crypto swaps are fully taxable disposals — each exchange triggers a gain computation at the INR market value at the time of the transaction. The only deductible cost is the acquisition cost of the disposed asset; no other costs (transaction fees, transfer costs, infrastructure costs) are deductible against gains.

The No-Loss-Offset Rule

India's most structurally punitive feature is its absolute prohibition on loss offsetting. Losses from VDA disposals cannot be offset against:

— Gains from other VDA disposals in the same year
— Income from any other head (salary, business, property, other sources)
— Gains in any future year (no carryforward)

Every profitable disposal is taxed at 31.2% in full. A losing disposal provides zero tax relief — not now, not ever. An investor who makes ₹1,000,000 on Bitcoin and loses ₹800,000 on Ether in the same tax year has a net portfolio result of ₹200,000, but a tax liability of ₹312,000 — which exceeds the net gain. This is not a marginal case; it is the expected mathematical outcome for any diversified portfolio with mixed results.

TDS on Every Transaction

Section 194S of the Income Tax Act requires a 1% Tax Deducted at Source on every VDA transfer above ₹10,000 (₹50,000 for specified persons). Indian-registered exchanges deduct and remit this TDS automatically on every sale. TDS paid is credited against the investor's final 30% tax liability at filing — it is not an additional tax but an advance payment mechanism. However, it has a significant liquidity effect: 1% of gross proceeds (not gains) is withheld on every transaction, meaning active traders have a material portion of their trading capital locked up as advance tax throughout the year.

For overseas exchanges not registered in India, the obligation to deduct TDS falls on the buyer. In practice this is widely non-compliant for peer-to-peer and overseas platform transactions, creating an enforcement challenge that the CBDT has flagged as an ongoing priority.

Staking and Mining

Income from staking, mining, and other yield-generating crypto activities is not taxed under the VDA regime. Instead, it is taxed under "income from other sources" at the individual's applicable income tax slab rates — which for high earners can reach 30% plus cess (31.2% effective), the same as the VDA rate but applied to income rather than gains. The tokens received have a cost basis equal to their INR value at receipt. Any subsequent gain on disposal is subject to the VDA 30% rate.

GST on Exchange Fees

Goods and Services Tax at 18% applies to crypto exchange service fees and brokerage charges from July 2025. This does not apply to the crypto transaction itself — only to the fees charged by the exchange for facilitating the trade. For active traders paying significant exchange fees, this adds a further cost layer to operations.

Reporting

VDA gains are declared in the annual Income Tax Return — ITR-2 for most individual investors, ITR-3 for those with business income. A dedicated Schedule VDA must be completed for all VDA transactions. The filing deadline is 31 July (or 31 October for audited cases). The combination of TDS at source and mandatory Schedule VDA reporting creates near-complete transaction visibility for the CBDT. India has committed to CARF implementation — its existing TDS infrastructure already provides transaction-level reporting that is more granular than most CARF requirements.