TaxSaral
Section 194Special Incomewas Section 115BBH in IT Act 1961

Virtual Digital Assets (Crypto) — 30%

Income from transfer of Virtual Digital Assets (VDA) — including cryptocurrency, NFTs, and digital tokens — is taxed at a flat 30% with no expense deductions (except cost of acquisition). VDA losses cannot be set off against any other income.

Who this applies to

Anyone who buys and sells cryptocurrency, NFTs, or other digital tokens on Indian or international exchanges.

Key Points

  • Flat 30% rate — no slab rates, no basic exemption benefit regardless of your income level.
  • Only the cost of acquisition can be deducted — trading fees, platform fees, and other costs are not deductible.
  • VDA losses cannot be set off against salary, business income, or any other income — not even against other VDA gains in the same year.
  • 1% TDS is deducted by Indian exchanges (Section 194S) on each sale — acts as an advance tax credit.

Worked Examples

1

Crypto profit and loss in the same year

Scenario

Tanmay bought Bitcoin for ₹5L (profit: sold for ₹8L) and Ethereum for ₹3L (loss: sold for ₹1L) in TY 2026-27.

Calculation

Bitcoin gain: ₹8L – ₹5L = ₹3,00,000
Ethereum loss: ₹1L – ₹3L = –₹2,00,000

VDA losses CANNOT be set off against VDA gains under IT Act 2025.

Tax on Bitcoin gain:
  ₹3,00,000 × 30% = ₹90,000
  Add 4% cess: ₹93,600

Ethereum loss: No benefit this year, cannot carry forward

Result

Tanmay pays ₹93,600 tax on the Bitcoin profit despite a ₹2L loss on Ethereum. The Ethereum loss is permanently lost — it cannot be used to offset other income or future crypto gains. This asymmetry makes crypto tax particularly harsh.

2

1% TDS credit at year-end

Scenario

Priya sells ₹10L worth of crypto on an Indian exchange. The exchange deducts 1% TDS = ₹10,000. Her actual profit was ₹2L.

Calculation

VDA income: ₹2,00,000
Tax at 30%: ₹60,000
Add 4% cess: ₹62,400

Less TDS credit: – ₹10,000
Balance payable: ₹52,400

Result

Priya has already 'pre-paid' ₹10,000 via TDS. She owes ₹52,400 more as advance/self-assessment tax. The TDS is visible in her Form 26AS / AIS for verification at ITR filing.

Related Sections

Section 198LTCG on Listed Equity (STT paid) — 12.5% above ₹1.25L
Section 196STCG on Listed Equity (STT paid) — 20%

Still have questions about Section 194?

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Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative — verify with a Chartered Accountant before filing.