The Taxation Architecture

The core of India’s crypto regulation is its stringent tax framework, designed to discourage speculative high-frequency trading and ensure full financial visibility.

• 30% Flat Tax: Any income earned from the transfer of VDAs – including trading profits, selling crypto for INR, or swapping one cryptocurrency for another—is taxed at a flat rate of 30% plus applicable cess.
• No Loss Set-Off: Perhaps the most restrictive rule is that losses from one crypto asset cannot be used to offset gains from another, nor can they be adjusted against other income sources like salary or business profit.
• 1% TDS: A 1% Tax Deducted at Source (TDS) applies to crypto transactions, ensuring a digital audit trail for every significant exchange of assets.

Compliance and Reporting

For the 2026 fiscal year, the government has tightened the enforcement architecture significantly. Crypto platforms operating in India are now formally registered with the Financial Intelligence Unit (FIU-IND) and must share user-level transaction statements directly with the Income Tax Department. Furthermore, a new penalty framework (Section 446) imposes daily fines for reporting failures, making correct ITR filing mandatory for any individual holding digital assets.