India’s Income Tax Department has put a plain-language note on the taxation of Virtual Digital Assets on its official website, reaffirming the 30% flat tax and the 1% Tax Deducted at Source (TDS) that have applied since 2022, while placing the newly enforceable Section 285BAA crypto-asset reporting duty at the centre of the current compliance file.
The note does not cut the rate, does not allow set-off of losses, and does not confer legal-tender status on cryptocurrencies. In one document, it puts the paper trail in writing.
Titled Virtual Digital Assets (VDAs) under the Income-tax Act, 1961, the official explainer is hosted on the department’s website at incometaxindia.gov.in. It sets out the definitions, the computation, the withholding regime and, in its last block, the reporting obligation that took statutory effect this financial year.
What the note actually says
The explainer treats VDAs as crypto assets, Non-Fungible Tokens (NFTs) and other digital assets, excluding Indian currency, Central Bank Digital Currency (CBDC), foreign currency and any other notified digital asset.
The statutory definition it reproduces tracks Section 2(47A) of the Income-tax Act, 1961, which covers information, code, number or token generated through cryptographic means; notified non-fungible tokens; any other notified digital asset; and, in its latest limb, any crypto-asset that is a digital representation of value relying on a cryptographically secured distributed ledger or similar technology to validate and secure transactions.
That last clause, Section 2(47A)(d), was inserted by the Finance Act, 2025 with effect from 1 April 2026, widening the VDA net so that a crypto-asset is caught even where it does not clearly fall under the earlier three sub-clauses.
The note also lists the exclusions. Under Notification No. 74 dated 30 June 2022, gift cards or vouchers, reward points or loyalty cards, and subscriptions to websites, platforms or applications do not qualify as VDAs. Under Notification No. 75 of the same date, non-fungible tokens whose transfer results in transfer of ownership of an underlying tangible asset and whose transfer of that underlying tangible asset is legally enforceable are excluded from the VDA definition.
The tax math has not moved
Income from the transfer of a VDA is still computed as the full value of consideration minus the cost of acquisition, if any, with the balance treated as capital gains or business income. That income is taxed at a flat 30%, plus applicable surcharge and cess, under Section 115BBH. The provision denies any deduction other than the cost of acquisition, disallows every other allowance, and shuts out set-off of any loss from the transfer of a VDA against income from another VDA or under any other head of income. Losses from VDAs cannot be carried forward.
TDS stays at 1% under Section 194S when payment is made to a resident for the transfer of a VDA. Where the payee is a non-resident, tax is deducted under Section 195.
No TDS applies if the aggregate consideration does not exceed Rs 50,000 in a financial year where the payer is an individual or Hindu Undivided Family (HUF) with business turnover below Rs 1 crore, professional receipts below Rs 50 lakh, or no business or profession income. For every other payer, the threshold is Rs 10,000.
The Union Budget 2026 left the 30% rate and the 1% TDS unchanged, a position The Crypto Times tracked through the year as Parliament proceedings unfolded.
The reporting rule is what changed
The last block of the department’s note is the one that reshapes the compliance file for financial year 2026-27. Specified reporting entities must furnish information on transactions involving crypto-assets, as defined in Section 2(47A)(d), in a prescribed form and timeline under Section 285BAA of the Income-tax Act, 1961.
Section 285BAA was inserted by the Finance Act, 2025 with effect from 1 April 2026. It requires any reporting entity, as prescribed, to furnish information on a transaction in a crypto-asset in a statement, for the prescribed period, within the prescribed time, in the prescribed form, to the prescribed income-tax authority.
Where a statement is defective, the entity can be treated as having furnished inaccurate information if the defect is not corrected. Non-filers can be issued a notice and given up to 30 days to file. Inaccuracies discovered after filing must be rectified within 10 days.
The Income-tax Act, 2025, which received presidential assent on 21 August 2025 and applies from 1 April 2026, carries the same duty forward as Section 509. Late filing can attract a penalty of Rs 200 a day. Inaccurate information can attract a penalty of Rs 50,000. The Crypto Times reported those penalty figures when Budget 2026 kept the tax rate frozen and added enforcement weight in its place.
Taxpayers already report their own transfers in Schedule VDA of the Income Tax Return (ITR). The new layer sits above that: specified entities such as exchanges will now file a separate transaction statement of their own with the department.
Why this note lands now
The one-pager sits on top of work the tax office has already put out this financial year. In July 2026, the Central Board of Direct Taxes (CBDT) issued a 198-page guidance note detailing reporting and due-diligence obligations for Reporting Crypto-Asset Service Providers (RCASPs).
The Crypto Times covered that shift on 27 July: Indian Crypto Investors Get Relief: CBDT Shifts Tax Reporting to Exchanges. The board aligned India with the Organisation for Economic Co-operation and Development’s (OECD) Crypto-Asset Reporting Framework (CARF), a global standard for the automatic exchange of tax information on crypto transactions.
Reporting is expected for calendar-year 2026 activity, with the first CARF-linked filings due by 31 May 2027 through Form 167. The board also clarified that its guidance was not a ruling on whether crypto is legal.
Minister of State for Finance Pankaj Chaudhary told the Lok Sabha on 8 December 2025 that search and seizure operations under Section 132 and survey actions under Section 133A had detected undisclosed VDA income of Rs 888.82 crore.
Separately, under CBDT’s NUDGE (Non-Intrusive Usage of Data to Guide and Enable) campaign, 44,057 communications were sent to taxpayers who invested or traded in VDAs but did not report them in Schedule VDA. The Crypto Times later recorded those figures in its coverage of the Parliamentary Standing Committee on Finance, including the 7-8 January 2026 sitting.
The policy backdrop has not softened since. On 16 September 2026, committee chair Bhartruhari Mahtab, Bharatiya Janata Party (BJP) Member of Parliament from Cuttack, told reporters at the end of a full-day hearing that the government “is not accepting virtual digital assets,” “doesn’t want to regulate it,” and that “not regulating it also leaves greater scope for different types of indulgences.” The panel is now waiting on a written response from the government before it prepares its report.
Taken together, the Indian position holds five pieces at once: no legal-tender status, no dedicated crypto statute, a 30% tax, a 1% TDS, mandatory registration for VDA service providers under the Prevention of Money Laundering Act, 2002 (PMLA), and now a statutory crypto-asset reporting duty.
What this means for users and platforms
For users, the levy is unchanged. A sale, swap or other transfer of a VDA still produces income computed only after cost of acquisition. A loss on Bitcoin (BTC) still cannot offset a gain on Ethereum (ETH). A loss still cannot be carried forward.
For platforms, the file gets heavier. Domestic exchanges already deduct 1% TDS on qualifying transfers and already sit inside the Financial Intelligence Unit of India (FIU-IND) net under the PMLA.
According to The Crypto Times’ pre-hearing briefing of 8 September 2026, the mid-2026 register listed 54 Virtual Digital Asset Service Providers (VDA SPs), covering domestic platforms such as CoinDCX, CoinSwitch, WazirX, ZebPay and Mudrex, along with selected offshore names.
On 9 September 2026, FIU-IND separately ordered the takedown of 15 offshore apps for serving Indian users without Anti-Money Laundering (AML) registration, as reported in India’s FIU Orders Takedown of 15 Offshore Crypto Apps Over AML Non-Compliance.
Offshore flow remains the softest edge of the framework. Data placed before Parliament in May 2026 estimated about 90% of Indian VDA volume on offshore platforms, and industry briefings before the September sitting put the FY 2024-25 offshore share at close to 91.5%. India has committed to the automatic exchange of crypto-account information under the OECD CARF from April 2027. Until then, Section 285BAA, and from 1 April 2026 its re-codified twin Section 509, is the domestic bridge.
Peer-to-Peer (P2P) trades are not outside the reporting perimeter either. The buyer continues to owe 1% TDS on qualifying transfers, and from 1 April 2026 that filing has moved from Form 26QE to Form 141, Schedule D, under the Income-tax Act, 2025 transition framework. The Crypto Times’ explainer sets out the deadline mechanics in detail.
The bottom line
India has not published a new crypto tax. It has published the map of a tax it already collects, and the reporting rule that makes that tax harder to miss.
The 30% rate stays. The 1% TDS stays. Losses still die in the year they are made. What has changed is visibility. Specified entities now carry a statutory duty to put crypto-asset transactions on a government statement.
In a market that is taxed but not regulated, that statement is now the closest thing New Delhi has to a piece of dedicated crypto market infrastructure.
Also Read: Bank Freezes and P2P Crypto Risk in India: How Accounts Get Frozen and How to Lower Your Exposure
