Crypto and VDA income tax filing for AY 2026-27

What counts as VDA income?

• Sale or exchange of crypto tokens.
• Transfer of NFTs or other notified virtual digital assets.
• Rewards, airdrops, mining, staking or business-style receipts, depending on facts.
• Foreign exchange trades or wallet transactions where Indian tax reporting applies.

The Income-tax Act, 1961 defines VDAs widely in section 2(47A) to cover crypto assets, NFTs and other notified digital assets, and the new Income-tax Act, 2025 carries the same 30% framework forward for tax years beginning 1 April 2026 – so there is no relaxation on the horizon for FY 2025-26 filing.

How the 30% tax under section 115BBH works

• Tax is a flat 30% plus surcharge and 4% cess on income from every transfer of a VDA, whatever your slab.
• Only the cost of acquisition is deductible. Exchange fees, gas fees, internet, electricity, advisory costs and interest cannot reduce the taxable gain.
• No set-off of any VDA loss is allowed – not against salary, capital gains, other income, or even gains on a different VDA. A loss on Bitcoin cannot offset a profit on Ethereum.
• No carry-forward: unabsorbed VDA losses lapse in the same year.
• Crypto-to-crypto swaps are also transfers: tax can arise even when no rupees reach your bank account.
• Chapter VI-A deductions (80C, 80D etc.) and the basic exemption limit cannot be applied against VDA income, and the section 87A rebate does not cover it.

Examples

Which ITR form should be used?

• ITR-2: commonly reviewed when the taxpayer has salary, house property, capital gains, VDA gains and no business/profession income.
• ITR-3: commonly reviewed when VDA activity is connected with business/profession, frequent trading, or other business income.
• ITR-1 and ITR-4: usually not suitable for VDA reporting where the form conditions exclude such income or schedules are not available.

How to fill Schedule VDA: step by step

Schedule VDA in the AY 2026-27 ITR-2 and ITR-3 forms demands transaction-level reporting – one row per transfer, not a single net figure:

1. Download the full-year trade report from every exchange and wallet you used, and list each transfer (sale, swap or spend) separately.
2. For each row, enter the date of acquisition and date of transfer of the tokens transferred.
3. Select the head of income – capital gains for investors, business income where trading is your business (this drives ITR-2 vs ITR-3).
4. Enter the cost of acquisition. If the tokens came as a gift, use the value on which the gift was taxed, per the schedule's instructions.
5. Enter the consideration received; income for the row is consideration minus cost.
6. If a row results in a loss, report the income for that row as nil – the schedule does not net losses against gains. Only the total of positive amounts is carried to the tax computation.
7. Cross-check the quarterly spread of gains for advance tax interest, and verify totals against AIS before submitting.

TDS under section 194S and how to reconcile it

Since 1 July 2022, the buyer (or the Indian exchange on the buyer's behalf) must deduct 1% TDS on the consideration for transfer of a VDA. The TDS is on the sale value, not the profit, so refunds are common where gains are small or negative.

Particular	Rule
Rate	1% of consideration (5% where PAN is not furnished)
Threshold – specified persons (individuals/HUFs below tax-audit turnover limits)	Rs 50,000 aggregate per financial year
Threshold – all other payers	Rs 10,000 aggregate per financial year
Crypto-to-crypto swaps	TDS can apply on both legs of the exchange
Where it shows up	Form 26AS and AIS against your PAN

Reconcile before filing: match exchange TDS certificates with Form 26AS and AIS/TIS entries, claim the full credit in the Tax Paid schedule, and investigate any sale that AIS shows but your Schedule VDA does not – mismatches are a common trigger for notices. Remember that 1% TDS rarely covers the 30% liability, so pay advance tax or self-assessment tax on the balance.

Crypto on foreign exchanges and Schedule FA

If you are resident and ordinarily resident and you held crypto on a foreign exchange or in a foreign custodial wallet at any time during the calendar year, disclose it in Schedule FA of ITR-2 or ITR-3 in addition to taxing the gains in Schedule VDA. Non-disclosure of foreign assets carries severe penalties under the Black Money Act, so do not skip this even for small balances. Income earned abroad may also need Schedule FSI and tax-relief claims – see our Schedule FA and DTAA guide. Self-custody hardware wallets and Indian exchanges generally sit outside Schedule FA, but classification can be fact-specific.

Mining, staking, airdrops and gifts

• Mining and staking rewards: generally taxable on receipt at the value of the tokens, as other-sources or business income depending on scale. When you later sell those tokens, the sale is taxed at 30% under section 115BBH; infrastructure costs of mining are not deductible as cost of acquisition.
• Airdrops: taxable on receipt where the tokens have ascertainable value; the taxed value becomes your cost for a future transfer.
• Gifts of VDA: VDAs are "property" for section 56(2)(x), so a recipient is taxed on gifts exceeding Rs 50,000 in a year, unless received from specified relatives, on marriage or under another exception.
• Salary or payment in crypto: taxed as salary or business receipts at the value on receipt, with a further 30% charge when the tokens are transferred.

Documents to keep ready

• Exchange-wise transaction report.
• Wallet transfer history and bank statements.
• TDS certificate or Form 26AS/AIS entries for section 194S where applicable.
• Cost of acquisition and sale value for each transfer.
• Details of any foreign platform or foreign asset reporting concern.

Common mistakes to avoid

• Netting crypto losses against crypto gains – Schedule VDA requires loss rows to be reported as nil, and section 115BBH bars set-off even between two VDAs.
• Deducting exchange fees, gas fees or subscription costs – only the cost of acquisition is allowed.
• Skipping crypto-to-crypto swaps because no money was withdrawn – a swap is a transfer and is taxable.
• Assuming the 1% TDS settles the tax – the balance up to 30% plus cess remains payable, ideally through advance tax instalments.
• Forgetting Schedule FA for holdings on foreign exchanges, or ignoring AIS entries reported by Indian exchanges.
• Filing ITR-1 or ITR-4 with VDA income, or reporting crypto under normal capital gains rates from our capital gains guide – VDAs have their own regime.

Frequently asked questions

How is crypto income taxed in India for AY 2026-27?

At a flat 30% plus surcharge and 4% cess under section 115BBH, with only the cost of acquisition deductible and no basic-exemption or Chapter VI-A benefit.

Can crypto loss be set off against other income or other crypto gains?

No. VDA losses cannot be set off against any income, including gains on another VDA, and cannot be carried forward.

Which ITR form is used for crypto income?

ITR-2 for investors without business income, ITR-3 where VDA activity is a business; both carry Schedule VDA. ITR-1 and ITR-4 do not support VDA income.

What is the TDS on crypto under section 194S?

1% of the sale consideration once it crosses Rs 50,000 a year for specified persons (Rs 10,000 for others), visible in Form 26AS and AIS and claimable against your final tax.

Do I need to report crypto held on foreign exchanges?

Yes – resident and ordinarily resident taxpayers must disclose foreign-exchange and foreign-wallet holdings in Schedule FA, besides taxing gains in Schedule VDA.

Are crypto gifts, mining, staking and airdrops taxable?

Yes. Gifts above Rs 50,000 are taxed for the recipient (with relative and occasion exceptions), while mining, staking rewards and airdrops are taxed on receipt, with a further 30% charge when the tokens are sold.

Get expert-assisted filing

All India ITR can review your exchange statements, AIS/TIS, TDS credits, VDA schedules and correct ITR form before filing.

Get capital gains and crypto filing help

Sources reviewed

• Income Tax Department: Schedule VDA – Virtual Digital Asset
• Income Tax Department: File ITR-2 Online user manual

This guide is for general understanding. VDA tax treatment can change based on transaction facts, platform records, business classification and foreign asset reporting.