India’s 30% tax on cryptocurrency gains isn’t just another rule-it’s one of the strictest crypto tax systems in the world. If you’re trading Bitcoin or any other digital asset in India, this tax changes everything. No matter how long you hold your coins, whether you made a profit or lost money overall, you still owe 30% on every single gain. And that’s just the start.
How the 30% Crypto Tax Actually Works
The tax comes from Section 115BBH of the Income Tax Act, introduced in April 2022. It applies to all Virtual Digital Assets (VDAs), including Bitcoin, Ethereum, NFTs, and tokens. The moment you sell, trade, or swap your crypto, you trigger a taxable event. There’s no difference between holding for a week or five years. A 30% flat rate hits every profit, no matter how small. Here’s the math: if you bought 1 Bitcoin for ₹30 lakh and sold it later for ₹40 lakh, your gain is ₹10 lakh. You pay 30% of that-₹3 lakh-in taxes. Simple. But here’s the catch: you can’t deduct anything else. Not the fees you paid on Binance or CoinSwitch. Not the wallet costs. Not even the gas fees from transferring coins. Only your original purchase price matters.The Loss Offsetting Trap
This is where most traders get blindsided. In most countries, if you lose money on one crypto and make money on another, you can offset the loss against the gain. In India? Not allowed. Imagine this: you lose ₹50,000 on Ethereum but make ₹50,000 on Solana. In the U.S. or Germany, you’d pay zero tax because your net gain is zero. In India? You still owe ₹15,000 in taxes on the Solana profit. The loss disappears. It doesn’t carry forward. It doesn’t reduce anything. You’re taxed on paper gains while your overall portfolio is down. This rule alone makes active trading extremely risky. Many traders who thought they were breaking even end up paying thousands in taxes because the system ignores net losses. It’s not about real profit-it’s about isolated gains.1% TDS: The Hidden Deduction
On top of the 30% tax, there’s a 1% Tax Deducted at Source (TDS) under Section 194S. This started in July 2022 and applies if your total crypto transfers in a year exceed ₹50,000. For P2P trades or international platforms, it’s ₹10,000. The exchange or platform takes this 1% before you even get your money. Let’s say you sold ₹2 lakh worth of Bitcoin. ₹2,000 gets pulled out as TDS. You get ₹1,98,000. Later, when you file your taxes, you can claim this ₹2,000 as a credit against your 30% tax bill. But here’s the problem: many traders don’t realize they even paid it. If you use an overseas exchange like KuCoin or Bybit, they don’t deduct TDS. That doesn’t mean you’re off the hook. You still have to report the sale and pay the TDS yourself. Many people miss this and get hit with penalties later.
18% GST on Exchange Fees (July 2025 Update)
In July 2025, the government added another layer: 18% GST on services provided by crypto exchanges. That means every trading fee, withdrawal fee, or deposit fee you pay to CoinSwitch, WazirX, or ZebPay now includes GST. If you pay ₹100 in trading fees, ₹18 goes to GST. This isn’t just an add-on-it’s a full three-tier system:- 30% income tax on gains
- 1% TDS on transfers
- 18% GST on platform fees
What You Need to Track
If you’re serious about staying compliant, you need records for every single transaction since April 2022. That includes:- Date and time of purchase
- Amount bought and price in INR
- Exchange or wallet used
- Date and time of sale or trade
- Amount sold and price in INR
- Any fees paid (even if they’re not deductible)
Why This System Fails Traders
Tax experts and accountants have called this framework “punitive” and “counterproductive.” Here’s why:- It treats every crypto trade like gambling income, not investment.
- It ignores net losses, forcing people to pay taxes even when they’re down overall.
- The 1% TDS creates confusion-especially for those using international platforms.
- It discourages innovation. Startups and developers are leaving India because the tax burden makes crypto projects unviable.
What Traders Are Doing Now
Many Indian traders have shifted to P2P markets on Binance or OKX to avoid TDS. Others use offshore wallets and only cash out when they’re ready to pay the tax. Some just stop trading altogether and hold long-term, hoping the rules change. But here’s the reality: avoiding TDS doesn’t mean avoiding tax. The government tracks blockchain activity. If you’re cashing out large amounts into your bank account, they’ll ask questions. You can’t hide forever. The most common complaint among traders? “I lost money overall, but still owe ₹80,000 in taxes.” That’s not a bug-it’s the system working as designed.What’s Next?
There’s no sign the government is softening this policy. The 30% rate, 1% TDS, and 18% GST are locked in for now. Some experts predict a review in 2026-2027, especially if trading volumes keep falling. But for now, the rules are harsh, clear, and unforgiving. If you’re trading crypto in India, you’re not just investing-you’re managing a complex tax burden. The good news? You’re not alone. Millions are in the same boat. The bad news? There’s no easy way out.Can I offset crypto losses against stock market gains in India?
No. Under Section 115BBH, crypto losses can only be offset against other crypto gains. You cannot use them to reduce taxes on stocks, real estate, or any other income. Even crypto-to-crypto losses can’t be offset if they’re on different assets. Each gain is taxed independently.
Do I pay tax if I just hold Bitcoin and never sell?
No. Tax is only triggered when you sell, trade, or exchange your crypto for INR or another asset. Holding Bitcoin, Ethereum, or any other digital asset without selling does not create a taxable event. But if you use it to buy goods, services, or other crypto, that counts as a sale and triggers tax.
What happens if I don’t report my crypto gains?
The Income Tax Department now cross-checks bank statements with crypto exchange data. If you don’t report gains and they find them, you’ll face penalties up to 200% of the tax evaded, plus interest. In serious cases, you could be investigated for tax fraud. Even if you used a foreign exchange, Indian authorities can request transaction records from international platforms under tax treaties.
Can I claim the 1% TDS I paid as a refund?
You can’t get it back as cash, but you can claim it as a credit against your 30% income tax liability. When you file your ITR, you’ll report the TDS amount in the tax credit section. It reduces the total tax you owe. If you paid more in TDS than your final tax bill, the excess is refunded. Many people miss this and lose money.
Do I need to pay tax if I trade crypto on international platforms like Binance?
Yes. Indian tax law applies to all residents, regardless of where the exchange is based. If you’re an Indian tax resident, you must report all crypto gains from any platform, including Binance, Kraken, or Coinbase. The fact that they don’t deduct TDS doesn’t mean you’re exempt. You’re still responsible for calculating, reporting, and paying the 30% tax plus 1% TDS yourself.
John Doyle
February 12, 2026 AT 09:12 AMBro this tax is insane. I trade crypto on Binance and I didn’t even know about the 1% TDS until I got hit with a notice. My accountant almost cried when I showed him the numbers. You’re basically paying tax on tax on tax. It’s not regulation, it’s a trap.
And don’t even get me started on how they treat crypto like gambling. If I buy a stock and hold it for 5 years, I get a break. But if I hold Bitcoin for 5 years? 30% flat. No mercy.