TAX & FINANCE INTELLIGENCE · INDIA · MARCH 2026
India’s Central Board of Direct Taxes has overhauled its reporting framework, mandating granular disclosure of virtual digital asset activity — marking a decisive shift toward crypto accountability in the Indian tax system.
Breaking By Tax Desk 6 March 2026 8min read
30%
Flat tax on VDA gains — no deductions
1%
TDS rate on crypto transfer value
₹50K
TDS threshold for specified persons
In a landmark regulatory move, the Central Board of Direct Taxes (CBDT) has issued a comprehensive update to India’s Income-Tax Rules and associated return forms, requiring taxpayers to disclose detailed information about transactions in Virtual Digital Assets (VDAs) — a category that encompasses cryptocurrencies, non-fungible tokens (NFTs), and other digital tokens.
The revisions, notified through an official gazette and effective for Assessment Year 2025–26 onwards, signal the government’s firm intent to bring the sprawling crypto economy within the ambit of formal taxation and audit scrutiny.
What Exactly Has Changed?
The most visible change is the introduction of a dedicated Schedule VDA within ITR-2 and ITR-3 forms — the returns typically filed by salaried individuals with capital gains, and business professionals respectively. Under this schedule, taxpayers must now disclose each VDA transaction separately, including the date of acquisition, date of transfer, cost of acquisition, and the resulting gain or loss.
Importantly, taxpayers are no longer permitted to aggregate multiple crypto trades into a single line item. Each trade — whether it involves Bitcoin, Ethereum, a stablecoin swap, or an NFT sale — must be reported individually. This granularity is designed to prevent under-reporting and to facilitate data matching with information already available to the department through TDS compliance.
“The era of treating crypto as a grey-zone asset is over. CBDT’s updated forms create an audit trail that mirrors what already exists for equity markets.”
The Tax Architecture: A Recap
To understand why these form changes matter, it helps to revisit the legal framework introduced by the Finance Act 2022, which first brought VDAs formally into the Income-Tax Act. Under Section 115BBH, income from the transfer of any VDA is taxed at a flat rate of 30% — with no allowance for deductions (except the cost of acquisition), no set-off against other income, and no carry-forward of losses. This made crypto one of the most punitively taxed asset classes in India.
Additionally, Section 194S mandated a 1% Tax Deducted at Source (TDS) on every crypto transfer above a specified threshold — ₹50,000 per year for specified persons (such as individuals and HUFs with turnover below ₹1 crore) and ₹10,000 for others. The TDS obligation falls on crypto exchanges and, in peer-to-peer transactions, on the buyer.
Key Changes at a Glance
- Schedule VDA introduced in ITR-2 and ITR-3 for AY 2025–26
- Transaction-wise reporting mandatory — no aggregation allowed
- Date of acquisition, transfer, cost, and gain/loss to be disclosed for every VDA trade
- Foreign crypto holdings to be reported under the Foreign Asset schedule (FA)
- Losses from VDA cannot offset gains from equities, mutual funds, or other assets
- NFTs and token rewards from staking or airdrops also captured under VDA definition
- Form 26AS and AIS (Annual Information Statement) now reflect TDS under 194S
Foreign Holdings and Offshore Exchanges
One area that has attracted specific attention is the treatment of crypto assets held on foreign exchanges or in self-custody wallets outside India. CBDT has clarified that such holdings must be disclosed under the Foreign Asset (FA) schedule of the ITR, which applies to resident Indians with assets abroad. This brings crypto into the same reporting framework as overseas bank accounts and foreign equity portfolios.
The move addresses a well-known regulatory gap: prior to this clarification, many taxpayers held crypto on international platforms like Binance or Coinbase without considering it a “foreign asset” in the conventional sense. That ambiguity has now been expressly resolved.
A Timeline of India’s Crypto Tax Journey
FEB 2022
Finance Budget 2022 — Finance Minister announces 30% flat tax on VDA income and 1% TDS; VDA formally defined in the Income-Tax Act for the first time.
APR 2022
Sections 115BBH & 194S come into effect. Crypto exchanges begin deducting TDS; early confusion over P2P obligations.
JUL 2022
First ITR filing season under the new regime. Most filers resort to manual disclosure in the capital gains schedule due to absence of a dedicated VDA section.
2024–25
CBDT introduces Schedule VDA in revised ITR forms, requiring transaction-level disclosure and aligning reporting with AIS data already held by the department.
MAR 2026
Current update — Further tightening of rules, including foreign asset disclosures, NFT-specific guidance, and staking reward treatment.
Implications for Taxpayers and Exchanges
For individual taxpayers, the most immediate implication is the need to maintain meticulous records of every transaction — something that many casual crypto users have historically neglected. Tax professionals are advising clients to download complete trade histories from all exchanges and reconcile these with the TDS credits visible in their Form 26AS before filing returns.
For crypto exchanges and Virtual Asset Service Providers (VASPs), the updated rules reinforce compliance obligations. Exchanges registered in India are already required to deduct TDS under Section 194S, but the new ITR schedules will allow the department to cross-verify data submitted by taxpayers against the TDS returns filed by exchanges — creating a closed-loop audit mechanism analogous to what exists for stock brokers.
“Taxpayers who assumed crypto gains could fly under the radar are in for a reckoning — the department’s data infrastructure has quietly caught up.”
NFTs, Staking Rewards, and Airdrops
A particularly complex area is the tax treatment of assets received through staking, liquidity mining, or airdrops. CBDT’s guidance treats these as income at the fair market value at the time of receipt, taxable as either business income or other sources depending on the nature and frequency of the activity. Upon subsequent sale, the FMV at receipt becomes the cost of acquisition for computing VDA gains.
NFTs present their own nuances: while most NFT sales are straightforwardly treated as VDA transfers, NFTs that represent rights over physical assets (such as real estate) may fall into a separate classification. Taxpayers dealing in NFTs are advised to seek professional guidance rather than apply a one-size-fits-all approach.
The Bigger Picture: India’s Regulatory Posture
These CBDT updates must be read alongside India’s broader regulatory journey on crypto. The country has chosen a path that is neither outright prohibition nor full embrace — instead opting for high taxation with strict reporting as a way to document the ecosystem while discouraging speculative excess. India’s Financial Intelligence Unit (FIU) has also been actively enforcing anti-money laundering compliance on crypto businesses, further tightening the net.
For the crypto industry, the hope remains that comprehensive regulation — even if onerous — provides the legal certainty needed for institutional participation and mainstream adoption. For the government, the reporting infrastructure now being built is expected to yield significant tax revenue as the industry matures.
₹1,400 Cr+
TDS collected on crypto transfers in FY 2022–23 alone (CBDT data)
Key Terms
VDA — Virtual Digital Asset. Any cryptocurrency, NFT, or digital token as defined under Section 2(47A) of the Income Tax Act.
TDS u/s 194S — Tax deducted at source by the buyer or exchange on every VDA transfer.
AIS — Annual Information Statement. A pre-filled summary of your financial transactions available in the income-tax portal.
Schedule FA — Foreign Asset schedule in ITR, now mandatory for crypto held on overseas platforms.
Assets Covered
Bitcoin Ethereum Altcoins Stablecoins NFTs DeFi Tokens Staking Rewards Airdrops
Action Checklist
Before filing your return:
- ✓Download full trade history from all exchanges
- ✓Cross-verify with Form 26AS / AIS
- ✓Record cost of acquisition for every VDA
- ✓Declare foreign exchange holdings under FA schedule
- ✓Consult a CA familiar with VDA rules
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