Crypto Tax Filing 2026: Schedule VDA Reporting, ITR 2 or ITR 3 Mandatory for All Virtual Digital Asset Trades
Crypto income faces strict tax rules in India. The system remains the same in 2026. Anyone earning from crypto must follow clear rules under the Income Tax Act.
The government introduced crypto taxation in 2022. It classified cryptocurrencies as Virtual Digital Assets under Section 2(47A). Popular coins like Bitcoin and Ethereum come under this category. NFTs also fall in the same group.
Flat 30% Tax on Crypto Profits
Crypto is not taxed like shares or property. Section 115BBH created a special rule. Profit from selling any Virtual Digital Asset is taxed at a flat 30%. On top of this, a 4% health and education cess is added. If total income is very high, surcharge may also apply.
Only the purchase price can be reduced from the sale price. No other expense is allowed. Exchange charges, brokerage, gas fees, and commission cannot reduce the tax amount.
Here is a simple example. A person buys crypto for Rs. 1,00,000. Later it sells for Rs. 1,50,000. The profit is Rs. 50,000. Tax at 30% is Rs. 15,000. Cess adds extra amount. Even if another crypto trade makes a loss, that loss cannot reduce this profit. Every sale is taxed separately.
1% TDS on Every Eligible Transaction
There is also 1% TDS on crypto transactions under Section 194S. This TDS is taken on the full sale amount, not on profit. If crypto sells for Rs. 1,50,000, then Rs. 1,500 is deducted as TDS. This can happen even if the sale results in a loss.
TDS applies when total crypto transfers in a year cross Rs. 50,000 for small taxpayers and Rs. 10,000 for others. After crossing the limit, 1% TDS is deducted on every eligible sale.
The 1% TDS is not extra tax. It works like advance tax. While filing the Income Tax Return, this amount is adjusted against the total tax. Refund can be claimed if extra TDS was deducted.
Loss from crypto cannot be adjusted against any other income. It cannot reduce profit from another crypto sale. It also cannot be carried forward to future years.
Crypto received as a gift is also taxable in some cases. If the value is more than Rs. 50,000 in a year and the gift comes from a non relative, the full amount becomes taxable. Gifts from close family members are not taxed.
Reporting Rules and Penalties
Income from mining, staking, referral bonuses, or airdrops is taxed at normal income slab rates. It does not come under the 30% rule.
All crypto transactions must be reported in Schedule VDA while filing the Income Tax Return. Individuals without business income use ITR 2. Those with business income use ITR 3. Details of purchase, sale, profit, and 1% TDS must be clearly shown.
If crypto income is not reported, interest and penalties apply. Interest is charged at 1% per month. Penalties can go up to 50% or even 200% in serious cases.
Crypto remains digital. Taxes remain real. Compliance in 2026 demands precision, records, and timely filing under the evolving Crypto tax in India 2026 regime. In short, clear records and proper filing are important under Crypto tax rules.
Crypto remains digital. Taxes remain real. Compliance in 2026 demands precision, records, and timely filing under the evolving Crypto tax in India 2026 regime. In short clear records and proper filing are important under Crypto tax rules.
