How is income from cryptocurrency or other virtual digital assets taxed in India

Question

I bought and sold some cryptocurrency during the year and made a profit, and I am not sure how to report this in my tax return. I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

How is income from cryptocurrency or other virtual digital assets taxed in India is governed in India primarily by Income-tax Act, 1961, Section 115BBH, Income-tax Act, 1961, Section 194S and Income-tax Act, 2025. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

Section 115BBH of the Income-tax Act, 1961 taxes income from transfer of a virtual digital asset, which covers cryptocurrency and similar assets as defined under Section 2(47A), at a flat specified rate, without allowing deduction of any expenditure other than the cost of acquisition, and without permitting set-off of a loss from one virtual digital asset against gains from another virtual digital asset or against any other income.

This flat-rate, no-set-off treatment is distinct from the ordinary capital gains framework applicable to shares or property, and it applies regardless of how long you held the asset, so there is no long-term versus short-term distinction and no benefit of a lower rate for longer holding periods for virtual digital assets under Section 115BBH.

Section 194S requires the buyer, or in the case of an exchange transaction the exchange, to deduct TDS on payment for transfer of a virtual digital asset once the aggregate value of transactions during the year crosses a specified threshold, and this TDS is available as credit against your final tax liability computed under Section 115BBH when you file your return.

Since losses on one virtual digital asset cannot be set off even against gains on another virtual digital asset, it is important to compute gains and losses transaction by transaction rather than netting your overall crypto portfolio performance, and to maintain detailed records of each acquisition and disposal, including the exchange statements, since the flat computation still requires accurate cost tracking.

What to do next: 1) Maintain detailed transaction-wise records of every virtual digital asset purchase and sale; 2) Compute gains separately for each asset without netting losses against other assets; 3) Claim credit for TDS deducted under Section 194S; 4) Report virtual digital asset income in the specific schedule provided in the return form.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — most remedies under Income-tax Act, 1961, Section 115BBH carry limitation periods, and a delay you cannot explain weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in this practice area.