The value of cryptocurrency transactions in India exceeded ₹51,000 crore in 2024-25, according to an analysis of data shared with Parliament, representing a 41% increase over the previous year.
The data, shared by the Ministry of Finance in reply to a question in the Rajya Sabha, shows that the government collected ₹511.8 crore as Tax Deducted at Source (TDS) on crypto transactions in 2024-25. As the rate of Tax Collected at Source (TCS) is 1% on every transaction, this means the value of total transactions that year stood at ₹51,180 crore.
In 2025, crypto in India transitioned from a "speculative fad" to a long-term wealth strategy, with investors holding an average of 5 different tokens compared to just 2 in 2022..
Under the Finance Act 2022, the government had introduced a provision in the Income Tax Act 1961, which has been retained in the Income Tax Act 2025, mandating a 1% TDS on any transfer of Virtual Digital Assets (VDAs) or cryptocurrencies.
Under the Income Tax Act, 1961, Bitcoin is classified as a Virtual Digital Asset (VDA). This classification was formalized through the Finance Act, 2022, which introduced specific sections to govern its taxation.
In the eyes of the Income Tax Act, 1961, Bitcoin is simply one specific type of "Cryptocurrency," and all cryptocurrencies are legally classified under the umbrella term Virtual Digital Assets (VDA).
Whether you are trading Bitcoin (BTC), Ethereum (ETH), or any other altcoin, the tax law makes no distinction between them. They are all treated as the same high-tax asset class.
Here is a breakdown of how Bitcoin is classified and treated under the Act:
1. Legal Classification: Section 2(47A)
The Act defines a "Virtual Digital Asset" under Section 2(47A). Bitcoin falls into this category because it is:
A number, token, or code generated through cryptographic means.
A digital representation of value that can be traded, stored, or transferred electronically.
Not "Indian currency" or "Foreign currency" as defined by law.
2. Tax Category: Section 115BBH
The taxation of Bitcoin is governed by Section 115BBH, which treats it as a special class of asset. Unlike traditional stocks or gold, Bitcoin is subject to a flat tax rate of 30% (plus applicable surcharge and 4% cess) on any income derived from its transfer.
Key features of this asset class:
No Deductions: You cannot claim any expenses or allowances (like brokerage, mining costs, or electricity) except for the Cost of Acquisition (the price you paid to buy it).
No Loss Set-off: If you make a loss on Bitcoin, you cannot set it off against gains from other Bitcoins, stocks, or your salary.
No Carry Forward: Losses from one year cannot be carried forward to future years to reduce tax liability.
3. Classification Based on Usage
While Section 115BBH sets the tax rate, the "head of income" depends on how you hold the Bitcoin.
4. TDS Requirements: Section 194S
To track transactions, the government treats Bitcoin as a "specified asset" subject to 1% TDS (Tax Deducted at Source).
This applies to any transfer of a VDA where the consideration exceeds ₹10,000 (or ₹50,000 for specified persons like individuals not having business income) in a financial year.
The exchange or the buyer is responsible for deducting this 1% and depositing it with the government.
It is important to note that In late 2025, the definition of VDA was further refined to explicitly cover assets relying on "distributed ledger technology" to ensure all emerging crypto-assets are captured under this 30% tax bracket.
In the Finance Act, 2025, the definition of Virtual Digital Assets (VDA) was expanded to explicitly include any asset that relies on "cryptographically secured distributed ledger technology" (DLT).
This move was designed to future-proof the law against new forms of decentralized technology and align India with the OECD's Crypto-Asset Reporting Framework (CARF).
1. What does the "Distributed Ledger" clause cover?
By using this specific technical language in Section 2(47A), the government ensures that even if a new digital asset isn't called a "cryptocurrency" or "NFT," it is still taxable if it:
Uses a decentralized network (like a Blockchain) to validate transactions.
Functions as a digital representation of value.
Uses cryptographic keys to secure ownership.
2. Tax Treatment of DLT-based Assets
Whether your asset is a Bitcoin, a governance token, or a new DeFi-based DLT asset, the rules remain the same.
3. Reporting Requirements (Starting April 2026)
One of the biggest changes in the 2025 Budget is the introduction of Section 285BAA. This mandates that any entity facilitating transactions in assets relying on distributed ledger technology must:
Maintain detailed records of the beneficial owners.
Report all transaction values to the Income Tax Department.
Correct any inaccuracies in filings within a strict timeframe or face heavy penalties.
