When Does Crypto Tax Apply in India? Understanding Taxable Crypto Transactions

Crypto taxes in India are not as simple as just paying when you sell. Every trade, gift, or even airdrop could bring tax rules into play. Many investors don’t realise that tax applies even when they swap one crypto for another. The government sees crypto as a digital asset, and just like stocks or real estate, gains from it are taxable.

Knowing which transactions are taxed—and which ones are not—can help you plan better. Let’s look at the key taxable crypto transactions in India, so you don’t get caught off guard.

Crypto transactions can be grouped into 3 broad categories:

1. Buying, Selling & Trading – Covers when you buy, sell, or trade crypto. Includes profits from selling, frequent trading, and advanced trades like futures/options.
2. Spending, Sending & Earning Crypto – Covers spending crypto on purchases, gifting, receiving it as salary, and earning through mining, staking, airdrops, gaming rewards, or lending interest.
3. Losses & Deductions – Covers what happens when you lose money, like trading losses or getting scammed.

Here’s a quick summary of how crypto taxes apply to different transactions in India.

Now let’s consider the tax rules for each category, one by one.

1. Tax on Buying, Selling & Trading Crypto

First, let’s consider all transactions where you acquire, sell, or exchange crypto assets (both spot assets like coins/tokens and derivatives like futures/options) with the intention of making a profit. 

These transactions result in capital gains or business income, making them taxable under Indian law.

Capital Gains vs. Business Income – What’s the Difference?
Crypto profits are usually taxed as capital gains if you invest and hold for some time before selling. However, if you trade frequently—such as day trading, futures trading, or engaging in high-volume transactions—your income may be classified as business income.

The difference matters because:

• Capital Gains (30% Tax under Section 115BBH) – Applies to occasional investors. Losses cannot be set off against profits.
• Business Income (Taxed as per Slab Rate) – Applies to frequent traders and businesses dealing in crypto. Expenses like trading fees may be deductible.

I–No Tax on Buying Crypto with INR

Tax applies only when you sell or trade.

II–Selling Crypto for INR

1% TDS (Tax Deducted at Source) under Section 194S + 30% tax on profits under Section 115BBH.

Technically, the TDS is applicable only if the transaction exceeds ₹50,000 for individuals and  ₹10,000 for others).

Example: You buy Bitcoin for ₹1,00,000 and sell it for ₹1,50,000. Your profit is ₹50,000.

• You pay ₹15,000 tax (30% of ₹50,000) under Section 115BBH.
• TDS of 1% (₹1,500) is deducted at the time of sale under Section 194S.

Remember, in practice, most exchanges deduct 1% TDS on every sale, even if you haven’t crossed the ₹10,000/₹50,000 threshold. This is a precautionary measure by exchanges to avoid compliance issues. But don’t worry: you can claim a refund when filing your crypto taxes.

Foreign Crypto Exchanges & Taxation

• If you trade on foreign crypto exchanges, TDS is not deducted automatically as Indian exchanges do.
• You are still required to manually calculate and deposit the 1% TDS under Section 194S when selling crypto.
• Failure to do so can result in penalties during tax filing.

Does This Apply to P2P Transactions?

Yes, 1% TDS under Section 194S also applies to P2P transactions. However, in exchange-based sales, the exchange deducts TDS automatically. In P2P trades, the buyer must deduct 1% TDS and deposit it with the government. If this is not done, the seller may still be held liable for non-compliance.

III–Crypto-to-Crypto Trade(Swapping One Crypto for Another)

Swapping crypto means exchanging one cryptocurrency for another without converting it to INR. It is treated as selling one asset and buying another at the current market value.

1% TDS under Section 194S + 30% tax on profits under Section 115BBH.

Example: You buy Ethereum worth ₹50,000 and swap it for Solana when its value rises to ₹70,000 and your profit is ₹20,000.

• You must pay ₹6,000 tax (30% of ₹20,000) under Section 115BBH.
• 1% TDS is deducted on the transaction under Section 194S.

P2P Crypto Swaps and TDS

If you swap crypto using a P2P trade (without an exchange facilitating the transaction), you must ensure that 1% TDS is deducted and deposited. Since exchanges handle this automatically for crypto-to-crypto trades on their platform, P2P traders need to be aware of their compliance obligations.

Tax on Spending, Sending, Earning, Gifting & Receiving Crypto

Whether you spend crypto for purchases, gift it to someone, or receive it as salary, crypto taxes may apply.

I–Paying for Goods & Services with Crypto

If you use crypto to buy something, it is treated as selling crypto at its market value. 

• 30% tax applies on any profit (Section 115BBH), and 
• 1% TDS is deducted (Section 194S).

Example:

• You buy Bitcoin for ₹1,00,000.
• Its value rises to ₹1,50,000, and you use it to buy a laptop.
• Your profit is ₹50,000, so you pay ₹15,000 tax (30%), plus 1% TDS on ₹1,50,000.

II – Sending Crypto to Another Wallet

Transferring crypto between your own wallets is not taxed

III–Gifting Crypto Tax

Gifting crypto is not taxed for the sender, but the recipient may have to pay crypto tax if the value exceeds ₹50,000 in a year (under Section 56(2)(x)). However, gifts to immediate family (spouse, parents, siblings) are exempt.

Example:

• You gift Ethereum worth ₹60,000 to a friend.
• Since it exceeds ₹50,000, they must pay income tax on the full ₹60,000 as “Income from Other Sources.”

IV–Receiving Crypto as Salary or Payment

If you earn crypto as salary or payment for services, it is taxed as income under Section 192 or 194R (depending on the nature of payment). The employer/client must deduct TDS as per income tax slabs.

Example:

• Your employer pays you 0.1 BTC when its value is ₹4,00,000.
• This is added to your taxable salary, and tax is calculated based on your income slab.
• If paid by a business, TDS at 10% (Section 194R) may apply.

V – Earning Crypto from Mining, Staking & Rewards

Crypto earned through mining, staking, airdrops, gaming rewards, or lending interest is taxed as income from other sources (Section 56).

Double Taxation on Airdrops:

• When you receive an airdrop, its value is taxed as “Income from Other Sources” under Section 56.
• Later, if you sell the airdropped tokens, the profit is taxed again at 30% under Section 115BBH, just like any other crypto sale.
• This means you pay tax twice: once when you receive the airdrop and again when you sell it.

Example: You mine 0.05 BTC when its value is ₹2,00,000.

• This amount is added to your taxable income, and tax applies based on your slab.
• If earned through a business setup, GST may apply.

Staking Rewards Taxation

• Staking rewards are taxed at the time they are received, not when they are sold.
• Even if the rewards are locked or cannot be immediately withdrawn, they are considered taxable income based on their market value at the time of receipt.
• When you later sell these rewards, any further gain will be taxed again as capital gains (30% tax + 1% TDS, if applicable).

GST on Crypto Transactions (for Businesses and Traders)

• If a business accepts crypto payments, GST may apply on transactions, similar to other goods/services.
• Also, crypto exchanges operating in India may be liable to 18% GST on transaction fees, which affects traders indirectly.

3. Tax on Losses & Deductions

In India, crypto losses cannot be used to reduce taxable income. This means that if you lose money while trading, you still owe tax on profits, but you cannot deduct losses to lower your tax bill.

I–Trading Losses

Losses from one crypto trade cannot be set off against profits from another. Each trade is taxed separately.

Example:

• You make ₹50,000 profit on one trade (taxable at 30%).
• You lose ₹30,000 on another trade.
• You still pay 30% tax on the ₹50,000 profit (₹15,000), even though you had a loss.

II–Losses from Hacks, Scams, or Forgotten Wallets

If you lose crypto due to hacks, scams, or losing access to your wallet, there is no tax relief. Unlike stocks, where losses can sometimes be written off, crypto losses do not reduce your taxable income.

Example:

• You buy Bitcoin for ₹2,00,000 but lose access to your wallet.
• This loss cannot be claimed as a deduction or offset against future gains.

Conclusion

Crypto taxes in India can be tricky, covering everything from trading and gifting to earning crypto. At Mudrex, we make things easier with tools like our Crypto Tax Calculator for smooth tax reporting.

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