Over the last few years, we’ve all heard terms like Bitcoin, Ethereum, NFTs, and crypto coins. These are all forms of Virtual Digital Assets (VDAs). While many people trade in them or even gift them, one big question arises: How does tax work on these assets in India?
Don’t worry – here’s a simple explanation.
✅ What Are Virtual Digital Assets (VDAs)?
VDAs include:
Cryptocurrencies like Bitcoin, Ethereum, Dogecoin.
NFTs (Non-Fungible Tokens) – unique digital collectibles, art, music tokens.
Any other digital asset notified by the government.
So, if you are buying, selling, or transferring these, you’re dealing in VDAs.
🧾 How Are VDAs Taxed in India?
From 1st April 2022, the government introduced a clear taxation framework:
Flat 30% Tax on any profit from VDAs.
Example: If you buy Bitcoin for ₹1,00,000 and sell it for ₹1,50,000, your profit is ₹50,000.
You must pay ₹15,000 as tax (30%).
No Deductions Allowed
You cannot claim expenses like internet charges, electricity bills, or transaction fees.
The only deduction allowed is the cost of purchase.
No Set-off of Losses
If you lose money in crypto, you cannot adjust it against other income like salary, rent, or even gains from shares.
Loss in one VDA cannot be set-off against profit in another VDA.
1% TDS (Tax Deducted at Source)
When you sell a VDA, 1% TDS is deducted on the transaction value if it crosses certain limits.
This applies whether you sell on an exchange or directly.
Example: If you sell crypto worth ₹1,00,000, then ₹1,000 (1%) will be deducted as TDS and reported to the government.
From 1st April 2022, the government introduced a clear taxation framework:
Flat 30% Tax on any profit from VDAs.
Example: If you buy Bitcoin for ₹1,00,000 and sell it for ₹1,50,000, your profit is ₹50,000.
You must pay ₹15,000 as tax (30%).
No Deductions Allowed
You cannot claim expenses like internet charges, electricity bills, or transaction fees.
The only deduction allowed is the cost of purchase.
No Set-off of Losses
If you lose money in crypto, you cannot adjust it against other income like salary, rent, or even gains from shares.
Loss in one VDA cannot be set-off against profit in another VDA.
1% TDS (Tax Deducted at Source)
When you sell a VDA, 1% TDS is deducted on the transaction value if it crosses certain limits.
This applies whether you sell on an exchange or directly.
Example: If you sell crypto worth ₹1,00,000, then ₹1,000 (1%) will be deducted as TDS and reported to the government.
🎁 What if You Receive VDAs as a Gift?
If you receive crypto/NFTs as a gift, they are taxable as “Income from Other Sources” if the total value of gifts exceeds ₹50,000 in a year.
Later, if you sell the gifted VDA, you will again pay 30% tax on profits
📌 Why Did the Government Do This?
The government wants:
To regulate crypto transactions.
To prevent tax evasion.
To ensure transparency in this new digital economy.
🧑💼 What Should You Do as an Investor?
Keep Records – note down every buy/sell price and date.
Report in ITR – declare income from VDAs separately in your Income Tax Return.
Plan Taxes – don’t assume crypto is tax-free; factor 30% tax before investing.
⚖️ Key Takeaway
Profits from crypto, NFTs, and other VDAs are taxed at 30% flat.
1% TDS is deducted on sales.
No loss adjustment or expense deduction is allowed.
So, while crypto may feel like the “currency of the future,” the tax rules are already here – and very strict!
