India Crypto Tax 2026: Transaction-Level VDA Reporting Without Loss Netting

India’s virtual digital asset regime taxes income from each VDA transfer at 30 percent under Section 115BBH, plus applicable surcharge and 4-percent health and education cess. Only cost of acquisition is allowed in that special computation; other expenditure is not deducted, and a loss from one VDA transfer cannot be set off against another income or carried forward. Section 194S separately imposes 1-percent TDS on consideration in covered resident transfers. Schedule VDA therefore cannot be built from one annual net exchange P&L.

Match the section number to the year. This guide retains Sections 115BBH/194S for FY2025–26 and its AY2026–27 return. For income from 1 April2026, the Income-tax Act2025 applies: the corresponding VDA special-rate provision is Section 194 and resident VDA withholding is in Section 393(1), Table 8(vi), with the threshold exception in393(4), Table 12. The renumbering does not turn the30% income tax or1% consideration withholding into a different tax. A2026 filing of a2025–26 return still uses the prior Act and the notified form for that assessment year.

30 percent applies to income from a VDA transfer

Section 115BBH calculates tax at 30 percent on income from the transfer of a virtual digital asset. Surcharge and the 4-percent health and education cess can increase the effective amount. The VDA definition covers notified digital representations and NFTs subject to statutory exclusions and notifications. A token-for-token exchange can be a transfer even when no rupees are received.

The special computation generally permits cost of acquisition, if any, but no deduction for other expenditure or allowances. Exchange commissions, gas, interest, mining electricity, software, and other overhead therefore should not be silently subtracted from Section 115BBH income merely because they appear in an economic P&L. Whether an amount forms part of legally recognized acquisition cost is a narrower question than whether it was commercially incurred.

VDA losses do not net with gains from another transfer

Section 115BBH expressly denies set-off of a loss from the transfer of a VDA against income under any provision of the Act and prohibits carryforward to later assessment years. The Income Tax Department’s 2026 loss guidance confirms that a VDA loss cannot be adjusted even against gains from another VDA.

Example: a taxpayer realizes ₹300,000 income on one BTC transfer and a ₹220,000 loss on an ETH transfer. The taxable Section 115BBH income is not ₹80,000. The ₹300,000 positive transaction remains in the special-rate base, while the ETH loss is not set off or carried forward. An exchange’s net realized P&L is therefore unsuitable as the tax base.

The rule also means that missing acquisition cost is material. A broker statement showing gross proceeds without a supported cost can overstate income; inventing a cost can understate it. Preserve purchase invoices, bank records, exchange trades, wallet transfers, and gift history at transaction level.

Section 194S: 1 percent of consideration, not profit

Section 194S generally requires the person responsible for paying consideration to a resident for a VDA transfer to deduct 1 percent at the earlier of credit or payment. This is withholding on consideration, not the final 30-percent tax on income. TDS shown in Form 26AS or related records is a credit and must be reconciled to the transfer; it does not replace Schedule VDA.

No deduction is required under Section 194S when annual consideration does not exceed ₹50,000 for a “specified person,” or ₹10,000 for other payers. The statutory definition of specified person covers an individual or HUF without business/profession income and certain smaller prior-year businesses or professions. In kind or VDA-for-VDA transfers require a mechanism to ensure the tax is paid before consideration is released.

Schedule VDA is transaction-wise

The 2026 notified return forms describe Schedule VDA as income from transfer of Virtual Digital Assets and require details of every transfer. Fields include acquisition date, transfer date, whether the income is under business or capital gains, cost of acquisition, consideration, and income from the transfer. The form instruction says to enter nil for a loss transaction, reflecting the no-set-off rule.

ITR-2 and ITR-3 selection depends on the taxpayer’s wider income and business status; Schedule VDA alone does not decide the head of income. Business classification can affect accounting and compliance, but it does not remove the Section 115BBH rate or create loss set-off prohibited by that section.

Provider reporting has its own calendar. Section 285BAA was the prior-Act reporting provision; under the new Act, Section 509 and Rules 242–244 govern the prescribed crypto-asset reporting framework. Rule 243 covers calendar years beginning on or after 1 January2026. Reporting providers identify reportable users and controlling persons through the prescribed due diligence and submit Form 167 by 31 May of the following calendar year, including a nil statement where required. It is a provider obligation, not a new Form 167 that every retail investor files. The first covered calendar year 2026 therefore has a normal31 May2027 statement deadline.

Three amounts that must not be merged

Complete the BTC/ETH example assuming no surcharge or other adjustments: ₹300,000 positive income × 30% =₹90,000 tax; 4% cess on that tax is₹3,600, giving ₹93,600 before credits. Taxing the net₹80,000 at 31.2% would produce₹24,960, understating this calculation by ₹68,640. The ETH loss is recorded with nil transfer income, rather than deleted from the transaction schedule.

Now examine a different transfer: gross sale₹500,000 against ₹800,000 supported cost, with₹2,000 disposal fees. Its economic loss before fees is₹300,000; its VDA income is nil. If the1% withholding applies, it is still₹5,000 on consideration. That valid credit does not disappear because the transfer lost money. Any refund depends on the full return, other income and verified tax credits.

Rule 243 reports specified fiat amounts net of transaction fees. Copying₹498,000 from that provider schedule into a gross-consideration field would hide the₹2,000 reconciliation. The reporting convention does not authorize a disposal-fee deduction from VDA transfer income. Keep gross sale, permitted acquisition cost, excluded expense, provider net amount and TDS credit in separate columns, tied to the same transaction identifier. Calendar-year provider totals must also be split into the taxpayer's applicable April-to-March year.

A report checklist for India

1. List every VDA transfer rather than annual net P&L.
2. Keep positive income and disallowed loss transactions separate.
3. Use only supportable cost of acquisition in Section 115BBH.
4. Match every Section 194S TDS entry to gross consideration.
5. Identify transfers paid wholly or partly in kind.
6. Separate spot VDA, gifts, rewards, mining, derivatives, and business records.
7. Reconcile opening units, acquisitions, transfers, disposals, and closing units.

Read the general India crypto tax overview, our global reporting guide, and the country-report directory before generating the filing workpaper.

The filing control is complete only when each loss row remains visible, each positive amount has a documented cost, and every claimed withholding credit matches official tax records. A missing credit is a reconciliation issue to resolve with the payer; it should not be fabricated from 1% of an estimated trade value.

Frequently asked questions

Official sources

• Income Tax Department: Section 115BBH
• Income Tax Department: Section 194S VDA withholding
• Government of India Notification 46/2026: individual ITR-2 and Schedule VDA
• Income Tax Department: Taxation of Virtual Digital Assets, 2026

Current-year primary references: Section 194, Section 393, Rule 243 and Form 167, and the official transition FAQ.

Substantively reviewed October 9, 2026. General information, not individualized Indian income-tax, TDS, business, nonresident, or filing advice.

Disclaimer: This article is for general informational purposes only and does not constitute tax advice. For individual tax advice, consult a licensed tax professional.