Bitcoin investing in India has grown rapidly as more users actively participate in trading and long-term holding. While buying Bitcoin is legal, profits generated from it are taxable. Therefore, understanding India’s crypto tax structure has become essential for every investor who wants to buy Bitcoin confidently and avoid compliance issues.
This comprehensive guide explains how Bitcoin is taxed in India, how income is calculated, which rules apply during trading, and what documents are needed for correct reporting in the Income Tax Return (ITR).
Disclaimer: This article is based on the current taxation framework applicable to Virtual Digital Assets (VDAs) in India for FY 2025–26. Tax rules may be updated in future budgets. Investors should consult a qualified tax advisor before filing returns.
How Bitcoin Is Taxed as a Virtual Digital Asset in India
Bitcoin falls under the Virtual Digital Asset (VDA) category as per the Income Tax Act. This means that any gain made from selling or exchanging Bitcoin is treated as taxable income.
Bitcoin taxation is different from equity investment taxation. It has its own dedicated section, and no slab-based benefits are applied.
What Counts as a Transfer of Bitcoin?
A taxable transfer includes the following situations:
Selling Bitcoin for INR
Exchanging Bitcoin for any other cryptocurrency
Using Bitcoin for the payment of goods or services
Transferring Bitcoin where monetary benefit is received
Non-taxable scenarios include:
Buying Bitcoin using INR
Holding Bitcoin without selling
Transferring Bitcoin between personal wallets
Tax applies only when value is realized through transfer.
30% Tax on Bitcoin Profits
Profits from Bitcoin transactions are taxed at a flat 30% rate under Section 115BBH, regardless of holding duration. There is no distinction between short-term and long-term gains.
Tax calculation includes:
30% tax on the profit amount
4% cess on the tax amount
No other deduction is permitted except the original buying cost.
Expenses such as brokerage fees, mining costs, interest costs, or trading tools cannot be deducted from profit.
This strict taxation rule is designed to regulate the crypto economy while preventing misuse through artificial loss claims.
No Loss Set-off and No Carry-Forward Allowed Under Section 115BBH
This is one of the most important points every investor should understand before trading actively.
Bitcoin losses cannot be set off against profits from other cryptocurrencies, stocks, or any form of income
Carry-forward of Bitcoin loss to future years is not allowed
If an investor buys Bitcoin at a higher price and sells at a lower price, the loss cannot reduce tax for any other income.
This makes risk control and strategic trading extremely important.
1% TDS on Bitcoin Transactions in India
Every time Bitcoin is transferred above a certain threshold, 1% TDS (Tax Deducted at Source) is applied. This rule is governed by Section 194S. TDS is deducted even if the transaction results in a loss.
TDS Threshold Rules for Bitcoin Traders
Annual transaction value must exceed:
₹10,000 for regular users
₹50,000 for specified small taxpayers (with non-commercial profile)
TDS is collected as advance tax. While filing ITR, TDS credits are adjusted against the final tax liability.
If more TDS is deducted than required, the investor is eligible for a refund.
18% GST on Crypto Platform Service Fees
GST does not apply to the value of Bitcoin that you buy. However, most Indian exchanges apply 18% GST on:
Trading fees
Platform service charges
Withdrawal or network fees
This GST impacts transaction cost, not tax liability.
For traders, the fee cost should always be acknowledged while planning an investment or trading strategy.
Example: Bitcoin Profit Tax Calculation in India
Suppose an investor buys Bitcoin worth ₹100,000 and sells it later for ₹150,000.
Profit = ₹50,000
Tax calculation:
30% of ₹50,000 = ₹15,000
4% cess on ₹15,000 = ₹600
Total tax = ₹15,600
If ₹1,500 TDS was deducted during the sale:
Final payable tax = ₹15,600 − ₹1,500 = ₹14,100
This illustrates how TDS reduces final tax payment but does not reduce tax liability itself.
Example: Bitcoin Loss Scenario and Its Tax Treatment
If Bitcoin is bought at ₹100,000 and sold at ₹80,000:
Loss = ₹20,000
However:
This loss cannot be adjusted against any other earnings
This loss cannot be carried forward
1% TDS may still be deducted if the threshold is crossed
Only the TDS credit can be used to adjust future tax during filing.
How to Report Bitcoin Income in ITR (Schedule VDA)
Investors must declare Bitcoin gains in the Schedule VDA section of the ITR.
Correct ITR selection:
ITR-2: If Bitcoin trading is occasional
ITR-3: If Bitcoin trading is considered a business activity
Required recordkeeping:
Buy and sell dates
Buying price and selling price
Quantity transferred
Exchange or wallet details
TDS deductions
Crypto exchanges like BuyUcoin provide downloadable transaction reports for accurate tax filing support.
Penalties and Compliance Risks if Bitcoin Tax Is Not Reported
Ignoring tax laws can result in:
Interest charges on unpaid tax
Penalties for misreporting income
Scrutiny due to TDS mismatch
Legal notices for deliberate evasion
The government collects data through KYC-verified exchanges and banking channels, making transparency essential for safe investing.
How to Buy Bitcoin in India With Tax Awareness
Investors should take a compliance-friendly approach to avoid legal risk.
For responsible buying:
Choose a trusted Indian exchange
Complete KYC for secure transactions
Maintain accurate transaction logs
Track profit separately from capital value
Download TDS and trade statements regularly
Buying Bitcoin remains simple, but tax-ready investing ensures long-term confidence and clean documentation.
Reliable exchanges such as BuyUcoin support Bitcoin investing through secure INR deposits, real-time trade records, and easy report downloads for tax filing.
Frequently Asked Questions About Bitcoin Tax in India
Is Bitcoin legal in India?
Yes. Trading Bitcoin is permitted. However, profits are taxable.
Do I pay tax if I only buy and hold Bitcoin?
No. Tax applies only when Bitcoin is transferred at a profit.
Is 1% TDS an additional tax?
No. TDS is an advanced deduction and adjusted during ITR filing.
Can Bitcoin losses reduce my tax?
No. Losses from VDAs cannot be set off or carried forward.
Is GST applicable to Bitcoin?
GST is applied only on exchange service fees, not on Bitcoin’s value.
Are You Interested in cryptocurrency?
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