Introduction
The latest Income Tax Bill 2025, tabled in Parliament, maintains the existing 1% TDS on cryptocurrency transactions—despite growing calls from industry for relief. Manika TaxWise brings you a comprehensive guide to understand what this means for Indian crypto investors and traders. Dive into key clauses, real examples, compliance tips, and FAQs to stay informed.
🔍 Section 1: What Does the New Tax Bill Say?
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Definition Gets Clearer: Virtual Digital Assets (VDAs)—including cryptocurrencies and NFTs—are officially defined as capital assets in Section 2(47A) and related clauses starting April 2026
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30% Flat Tax Remains on income from VDA transfers under Section 115BBH—no relief introduced for gains .
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1% TDS Stays on all transfers above threshold limits (₹10,000 for individuals, ₹50,000 for businesses/HUF) u/s 194S
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No Allowance for Loss Offsets—losses from one VDA cannot be set off against gains from another, nor against other income heads
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Mandatory Reporting Begins FY 2025‑26: Exchanges and individual taxpayers must report detailed crypto transactions, with penalties for non-compliance
Section 2: Why No Relief? Government’s Perspective
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Compliance Over Convenience
The 1% TDS is intended as a tracking mechanism, helping the government monitor flows in a largely opaque crypto space -
Growing Collection Figures
In FY 2023‑24, the government collected ₹437.43 crore in crypto income tax—up 62% YoY from ₹269.09 crore in FY 2022‑23 -
Industry Appeal Lacks Buy-In
Sector calls for lowering TDS to 0.01% or aligning with progressive tax slabs were not accepted—and remain stalled
Section 3: Impact on Investors & Traders
✅ What Stays the Same
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Flat 30% tax on all crypto gains, irrespective of holding period or purpose.
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1% TDS deducted upfront, applied on total transaction value—not profit.
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Only the cost of acquisition can be deducted.
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Loss from one crypto asset can't offset another or other income.
❗ New Compliance Burdens
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Schedule VDA reporting mandatory in ITR starting FY 2025‑26.
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Record keeping becomes critical for tax audits and compliance.
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Non‑filers or high‑TDS accounts flagged via analytics tools like NMS, Project Insight
Section 4: Real‑World Examples
| Scenario | Illustration & Tax Impact |
|---|---|
| Crypto Sale (Fiat) | Sell BTC for ₹2 L, cost ₹1.5 L → Gain ₹50,000 → Tax ₹15,000 + 4% cess, plus 1% TDS on ₹2 L (₹2,000) |
| Crypto‑to‑Crypto Swap | Swap ETH for USDT—Gain taxed at 30%, plus 1% TDS on gross swap value |
| Loss Scenario | Sell ETH at ₹40,000 loss? TDS still deducted; loss not set off against gains on BTC or other assets. |
Section 5: Practical Tips for Crypto Taxpayers
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Track Every Transaction using reliable spreadsheets or tax apps—ensure you capture date, value, cost basis.
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TDS Credit: Claim the 1% TDS deducted in Form 26QE and Schedule VDA when filing your return u/s ITR‑2 or ITR‑3 depending on treatment
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Retain Documents: Exchange statements, wallets, trade logs—essential for audit trail.
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Consult Experts: Especially if you're mining, staking, or making international trades—classification and tax treatment may vary.
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Timely Reporting: Prepare for new Schedule VDA / 285BAA disclosures in ITR 2025‑26 onwards The Crypto Times.
Section 6: Broader Implications for India’s Crypto Ecosystem
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Liquidity Shrinks: Trading volumes have dipped as traders shift to offshore platforms to avoid heavy TDS and tax burden The Economic Times.
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Innovation Delay: High taxation discourages startups and NFT development; tools remain under‑utilized.
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Regulatory Clarity—but at Cost: Tax clarity is welcome—but the continued rigidity may hamper mass crypto adoption
Conclusion
Despite repeated calls from stakeholders, the Finance Ministry has upheld the stringent crypto tax framework in the latest Income Tax Bill 2025. The 1% TDS remains firmly in place, alongside a flat 30% tax on crypto gains, no loss offsets, and mandatory reporting. While clarity has improved, flexibility and relief for taxpayers are still out of reach.
For investors and traders, key takeaways include focusing on accurate record‑keeping, understanding reporting obligations, and preparing for compliance requirements starting FY 2025‑26.
This article is brought to you exclusively by Manika TaxWise, your trusted guide to making sense of evolving tax laws—written in friendly, professional language for beginners and experienced users alike.
🔖 FAQs
1. What is the 1% TDS on crypto in India?
Under Section 194S, a 1% TDS is levied on the gross consideration (not just profit) of VDA transfers exceeding ₹10,000 (₹50,000 for certain entities) in a financial year
2. Can I offset crypto losses against other capital gains?
No. Losses from one digital asset cannot be set off against gains from another VDA or against other income heads
3. What happens if I miss TDS refund deadlines?
A parliamentary panel has recommended allowing taxpayers to claim TDS refunds beyond due dates without fines under the new Income Tax Bill
4. Do I need to report every crypto trade in my ITR?
Yes. Mandatory reporting via Schedule VDA (under section 285BAA) begins FY 2025‑26—exchanges and individuals must disclose transaction details The Crypto Times.
5. Is there any reduction in tax rate or regulatory relief planned soon?
Not currently. The Budget 2025 reaffirmed the existing tax regime, rejecting calls for reduced TDS, progressive gains tax, or loss offsets
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