Question 1

How is cryptocurrency taxed in India?

Accepted Answer

Under Section 115BBH, all gains from Virtual Digital Assets (VDA) including cryptocurrency, NFTs, and tokens are taxed at a flat 30% plus 4% health and education cess. No deductions are allowed except the cost of acquisition. Additionally, 1% TDS is deducted at source on all VDA transfers exceeding ₹10,000 per year (Section 194S). Losses from one crypto cannot be set off against gains from another crypto or any other income.

Question 2

Can I set off crypto losses against other income or other crypto gains?

Accepted Answer

No. Under Indian tax law, losses from the transfer of Virtual Digital Assets cannot be set off against any other income, including gains from other VDAs. Each crypto transaction is taxed independently. If you sell Bitcoin at a loss and Ethereum at a profit, you still pay 30% tax on the Ethereum profit without any offset from the Bitcoin loss.

Question 3

What is the 1% TDS on crypto and how does it work?

Accepted Answer

Under Section 194S, a 1% TDS (Tax Deducted at Source) is applied on all VDA transfers exceeding ₹10,000 per financial year (₹50,000 for specified persons). The buyer or the exchange deducts 1% of the transaction value and deposits it with the government. This TDS can be claimed as a credit when filing your income tax return. Note: TDS is on the sale value, not the profit.

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