Crypto Law Profile
India’s VDA tax/TDS regime applies a 30% tax to VDA transfer income and 1% TDS on resident transfer consideration, now carried into the Income-tax Act, 2025.
Status: India’s virtual digital asset (VDA) direct-tax regime is in force. The regime was introduced through the Finance Act, 2022 by inserting section 2(47A), section 115BBH and section 194S into the Income-tax Act, 1961. For tax years and TDS events from April 1, 2026, the Income-tax Act, 2025 carries the regime forward through successor VDA definition, special-rate tax, and TDS provisions.
For CryptoSlate’s law archive, this profile tracks both the original 1961 Act sections most commonly cited in market and tax commentary and the successor 2025 Act mapping that now matters for current-law references. It is a legal-reference summary only and does not provide tax advice or filing guidance.
Section 115BBH of the 1961 Act applied a 30% rate to income from the transfer of any virtual digital asset. It also restricted deductions by allowing only cost of acquisition, if any, and disallowed setoff or carry-forward of loss from VDA transfers. The provision was inserted by the Finance Act, 2022 with effect from April 1, 2023.
The Income-tax Act, 2025 retains the core treatment in tabular form: any person with income from the transfer of a virtual digital asset is taxed at 30%, with equivalent limits on expenditure, allowance, setoff and carry-forward of loss. This makes the 1961 Act section important historically, while the 2025 Act provision is the current statutory reference for post-transition tax years.
Section 194S required any person responsible for paying a resident consideration for transfer of a VDA to deduct 1% TDS at the earlier of credit or payment. The section also addressed transfers where consideration is wholly or partly in kind, requiring the responsible person to ensure the tax has been paid before releasing consideration.
The original 194S thresholds exempted deduction where the value or aggregate value of consideration did not exceed ₹50,000 for a specified person or ₹10,000 for other persons during the financial year. The Income-tax Act, 2025 carries the VDA TDS rule into section 393(1), Table Sl. No. 8(vi), and preserves the same practical threshold structure in the no-deduction table.
Under section 2(47A) of the 1961 Act, a VDA covered certain electronically transferable or tradable digital representations of value, non-fungible tokens or similar tokens, and other notified digital assets, while allowing the Central Government to notify exclusions. The 2025 Act continues the VDA definition and adds a crypto-asset limb that captures digital representations of value relying on a cryptographically secured distributed ledger or similar technology.
CBDT issued Circular No. 13/2022 for section 194S transactions conducted on or through exchanges and Circular No. 14/2022 for transactions outside the exchange context. The guidance explains roles for exchanges, brokers, buyers and sellers; TDS handling in VDA-for-VDA or in-kind transactions; forms such as 26Q, 26QE and 26QF under the old framework; and the interplay with section 194Q.
For transition to the 2025 Act, CBDT’s updated FAQs state that the governing TDS law depends on the earlier of credit or payment: events on or before March 31, 2026 remain under the 1961 Act, while events on or after April 1, 2026 use the 2025 Act. The FAQs also state that TDS rates and monetary thresholds were retained in the new Act, with forms and section references reorganized.
This regime is primarily a taxation and reporting measure. It does not itself create a comprehensive crypto licensing framework, market-conduct rulebook, or approval regime for trading platforms. Editors should cross-reference this profile with India’s AML treatment of VDA service providers and any separate reporting obligations for crypto-asset transactions under the 2025 Act.
Defines VDAs to include digital value tokens, NFTs or similar tokens, notified assets, and under the 2025 Act a crypto-asset limb.
Applies a 30% rate to income from VDA transfers; continued in the 2025 Act’s special-rate table.
Allows only cost of acquisition, if any; no other expenditure, allowance, setoff, or carry-forward of VDA transfer loss.
Requires 1% TDS on consideration paid or credited to a resident for VDA transfer; current reference is 2025 Act s. 393(1) Table 8(vi).
No deduction when annual consideration is within ₹50,000 for specified persons or ₹10,000 for others.
Circulars 13/2022 and 14/2022 address exchange, broker, P2P, in-kind and VDA-for-VDA TDS implementation.
President’s assent to Finance Act 2022; VDA direct-tax provisions introduced in the Income-tax Act, 1961.
CBDT published exchange-focused guidelines for section 194S implementation.
CBDT published guidance for VDA transfers other than those on or through an exchange.
1% TDS on qualifying resident VDA transfer payments becomes operative.
30% VDA income-tax provision applies from AY 2023-24 under the 1961 Act.
Current VDA tax/TDS references move to 2025 Act successor provisions.
Central Board of Direct Taxes, Income Tax Department, Ministry of Finance
Crypto assets, NFTs, Virtual Digital Assets
This profile covers India’s VDA direct-tax regime introduced through the Income-tax Act, 1961 sections 2(47A), 115BBH and 194S, and notes the current-law transition to the Income-tax Act, 2025. It is not legal or tax advice.
