Capital Gains on Crypto and Virtual Digital Assets

Looking for REIT or InvIT taxation instead? That is covered on its own page, Business Trust Capital Gains (115UA). VDA taxation involves fact-specific determinations. This article is for general information and does not constitute tax advice.

A flat 30%, with no long-term rate at all

Gains from transferring a Virtual Digital Asset, cryptocurrency, NFTs, and similar assets, are taxed at a flat 30% under old Section 115BBH, regardless of how long the asset was held. There’s no short-term or long-term distinction here at all, unlike every other asset covered elsewhere on this site.

No deduction is allowed against this gain apart from the cost of acquisition; expenses like transaction or platform fees generally don’t reduce it. Losses are treated harshly: a loss on one VDA cannot be set off even against a gain on a different VDA, let alone against any other type of income, and VDA losses cannot be carried forward to future years at all.

TDS, and what counts as a separate taxable event

A 1% TDS applies under Section 194S on the transaction value when a VDA is transferred, once the payment crosses the applicable threshold. This is only an advance collection mechanism, credited against the eventual 30% liability, not the final tax itself.

Receiving crypto as payment for goods or services, or through mining, is a separate taxable event, taxed as income at its fair value when received; the 30% rate then applies separately when that crypto is eventually sold or transferred, using that earlier value as the cost base. Gifting a VDA is taxable in the recipient’s hands, similar to other gifts, once the value crosses the applicable threshold, covered further in Gifts.