According to reports from Mint, cryptocurrency gains in India are taxed at a flat rate of 30% (plus 4% cess) regardless of whether the income is treated as capital gains or business income. This uniform taxation applies to both short-term and long-term capital gains from virtual digital assets such as cryptocurrencies and NFTs. A separate 1% TDS is charged when crypto assets are transferred, which refers to changes in ownership rather than simple wallet transfers. The TDS exemption threshold is ₹10,000 for total sales during the year, or ₹50,000 for individuals or Hindu undivided families (HUFs) with business turnover up to ₹1 crore (₹50 lakh for specified professions). Research by the Esya Centre found that between July 2022 and July 2023 alone, more than 90% of crypto transactions by Indian investors migrated to offshore platforms, with total offshore trading volume exceeding $42 billion over that period. By the most recent estimates, approximately $6.1 billion flows offshore annually, while the government collects only ₹437 crore in domestic crypto taxes.
As reported by Mint, several cryptocurrency transactions are subject to taxation under income tax law. These include using cryptocurrencies to buy goods or services, exchanging cryptocurrencies for other digital assets, trading cryptocurrency using fiat currency such as INR, receiving cryptocurrency as payment for services or gifts, mining cryptocurrency, staking crypto and earning stake benefits, and receiving airdrops. The tax applies to all these activities regardless of whether the crypto assets are recognised as legal tender in India. According to CoinSwitch co-founder Ashish Singhal, the framework "creates friction rather than fairness" by taxing individual transactions without recognizing losses. KoinX founder Punit Agarwal documented that over 30% of users had TDS deductions that exceeded their actual final tax liability, meaning they were net lenders to the government all year, waiting on a refund.
According to Mint, investors must disclose cryptocurrency gains under Schedule VDA while filing their income tax return. The tax treatment depends on the nature of the transaction and type of income earned. If crypto units are held as investments, the income must be reported under 'Capital gains' head. If crypto is traded frequently, it must be reported under 'Profits and Gains from Business or Profession' head. Gifts of digital assets will attract tax in the hands of the receiver, and any losses from digital asset sales cannot be set off against other income, unlike provisions available for equities. Since April 1, 2026, all registered Indian crypto exchanges are required to share complete user transaction data directly with the Income Tax Department under Section 509 of the Income Tax Act. Investors who fail to file the Schedule VDA section now face a daily penalty of ₹200, while incorrect disclosures carry a flat fine of ₹50,000. The department uses AI-driven analytics tools including Project Insight to cross-reference exchange-filed TDS data against individual returns, with a discrepancy of more than ₹1 lakh triggering an official notice.
As reported by Mint, calculating tax on cryptocurrency can be complex for investors with multiple transactions across different exchanges and wallets. Crypto bookkeeping software can help manage assets by consolidating transactions, automatically identifying activities such as deposits, withdrawals, trades and staking income, and generating reports for capital gains and holdings. However, investors must still classify uncategorised entries and verify that closing balances match actual crypto holdings before finalising tax calculations. Looking ahead, India is planning to adopt the OECD Crypto-Asset Reporting Framework by April 2027, which will enable automatic cross-border data sharing on offshore holdings and significantly narrow the practical gap between offshore trading and domestic enforcement. The Finance Ministry, SEBI, and the RBI are in active discussions on a multi-regulator framework, though the RBI reportedly blocked a 2026 policy discussion paper.
