A Practical Guide to Crypto / Virtual Digital Asset (VDA) Taxation Advisory
Cryptocurrency, NFTs, and tokens are not a grey area under Indian tax law any more — they are a defined, heavily-taxed category with its own section of the Income-tax Act, its own TDS regime, and its own reporting schedule in your ITR. The rules are unusually strict: a flat 30% tax on gains, no loss set-off between different coins, and 1% TDS deducted on almost every transaction. Get any part of this wrong — mismatched Form 26AS entries, an undisclosed foreign exchange wallet, a loss claimed against your salary income — and you are looking at a notice, not just a correction.
Understanding the Service
A Virtual Digital Asset (VDA) is a term the Finance Act 2022 introduced into Indian tax law by inserting clause (47A) into Section 2 of the Income-tax Act, 1961. It covers any information, code, number, or token generated through cryptographic means or otherwise — including cryptocurrencies such as Bitcoin and Ethereum, Non-Fungible Tokens (NFTs), and similar digital tokens — that represents value and can be transferred, stored, or traded electronically. The Central Government has the power to notify specific categories of digital assets as excluded from this definition (and has notified certain gift cards, vouchers, and subscription-based platform tokens as excluded), but for the vast majority of traders and investors, cryptocurrency and NFT holdings fall squarely within the VDA definition.
For the full scope, current process and what PNPC includes, see the dedicated Crypto / Virtual Digital Asset (VDA) Taxation Advisory service page.
Is This Relevant to Your Business?
- You have bought, sold, swapped, or received cryptocurrency, NFTs, or other digital tokens during the financial year — even a single transaction requires disclosure in Schedule VDA of your ITR
- You trade actively across multiple exchanges (domestic and/or international) and need your Form 26AS TDS credits reconciled against actual transaction-level data before filing
- You have received crypto as a gift, as payment for freelance or consulting work, through an airdrop, or through staking/mining rewards — each has a distinct tax characterisation that needs to be applied correctly
- You hold VDAs on a foreign exchange or in a self-custody wallet and need guidance on Foreign Asset disclosure under Schedule FA and potential Black Money Act exposure
What This Doesn't Cover
- You have never held or transacted in any cryptocurrency, NFT, or digital token — this advisory is specific to VDA holders and traders
- Your only crypto-adjacent activity was purchasing goods or services using a payment platform that itself does not involve you holding or transferring a VDA — confirm this distinction with us if you are unsure
- You are looking for investment advice on which cryptocurrency to buy or when to trade — PNPC provides tax and compliance advisory, not investment or trading recommendations
Common Questions
Does the new Income-tax Act, 2025 change how crypto and NFTs are taxed?
Not in substance. The Income-tax Act, 1961 has been replaced by the Income-tax Act, 2025, in force from 1 April 2026 (Tax Year 2026-27 onward, with 'Tax Year' replacing the earlier 'Assessment Year'/'Previous Year' terminology). The VDA regime itself is carried forward largely unchanged — the flat 30% charge that sat under Section 115BBH of the 1961 Act now sits under Section 194(1) of the 2025 Act, and the 1% TDS that sat under Section 194S now sits under Section 393(1). The rate, the cost-of-acquisition-only deduction, the coin-by-coin no-set-off rule, and the no-carry-forward restriction are all unchanged in substance. Returns for Tax Years up to 2025-26 continue to reference the 1961 Act's section numbers.
What exactly counts as a Virtual Digital Asset (VDA) under Indian tax law?
Section 2(47A) of the Income-tax Act, inserted by the Finance Act 2022, defines a VDA broadly to include cryptocurrencies (Bitcoin, Ethereum, and similar tokens), Non-Fungible Tokens (NFTs), and any other information, code, number, or token generated through cryptographic means that can be transferred, stored, or traded electronically. The Central Government can specifically exclude certain categories by notification — some gift cards, vouchers, and subscription-linked platform tokens have been excluded. For nearly all cryptocurrency holders and NFT collectors, the holding falls within the VDA definition.
What is the tax rate on cryptocurrency and NFT gains in India?
Section 115BBH taxes income from the transfer of a VDA at a flat 30%, plus applicable surcharge based on your total income slab, plus 4% health and education cess. This rate applies uniformly regardless of your income tax slab, regardless of how long you held the asset, and regardless of whether you would otherwise characterise the activity as investment or trading.
Getting This Right From the Start
Speak directly with a PNPC Chartered Accountant about your crypto and digital asset tax position. Not a subscription tool that stops at aggregating your transactions — a practising CA who applies judgment to every classification question, reconciles your TDS credits before the Department flags a mismatch, and stays with you from your first trade through your first notice, if one ever arrives.
PNPC Global has advised Chennai, Bangalore and Hyderabad businesses since 1986. Explore the full Income Tax practice for related services, or go straight to the Crypto / Virtual Digital Asset (VDA) Taxation Advisory page for specifics.
Specific rates, fees, thresholds and deadlines are set by the relevant authority and change over time — this article deliberately does not quote figures that could go stale. Confirm current numbers directly with PNPC or the official source before you act.