India taxes virtual digital assets at 30% with 1% TDS. Reporting rules tightened in 2026. Here is where the law stands and where it is heading.

Digital assets and regulatory evolution is one of the themes on the agenda at Unchained Summit India, running 5 and 6 November 2026 in Mumbai. Before that conversation happens on stage, here is where the law actually stands.

India has never banned crypto. It has taxed it instead, at rates few other countries attempt. India’s crypto tax rules for 2026 sit on top of a framework built in 2022, and this year brought the toughest compliance changes yet.

The Finance Act 2022 created Section 2(47A), defining Virtual Digital Assets, or VDAs, to cover cryptocurrencies, NFTs and similar tokens. Gains from selling, swapping or spending a VDA fall under Section 115BBH: a flat 30% tax, plus surcharge and a 4% cess. There is no distinction between short term and long term holding. Only the acquisition cost can be deducted. Losses cannot be set off against any other income, not even against a gain from a different digital asset.

Section 194S adds 1% TDS on most transactions. For traders who move in and out of positions often, this creates a cash flow problem long before any profit or loss is settled. Four years into the regime, none of these numbers have moved.

What changed in 2026 is compliance.

The Income Tax Act 2025 takes effect on 1 April 2026 and requires investors to report every trade, conversion and disposal of a VDA, not just net gains at year end. Anyone active in DeFi or holding assets across multiple wallets now carries a heavier reporting load. Schedule VDA in the ITR form is the mechanism for this, and enforcement has tightened alongside it.

Exchanges face new obligations of their own. From 1 April 2026, entities that report crypto transactions inaccurately face a fine of Rs 200 per day, rising to Rs 50,000 for serious lapses. India is also aligning with the OECD’s Crypto-Asset Reporting Framework, with cross border data sharing between tax authorities due to start on 1 April 2027.

None of this answers the larger question: what is a VDA, legally? Buying, holding and selling crypto remains legal in India. But no law grants it the status of currency or legal tender. The RBI has said repeatedly that crypto is not money and poses a risk to financial stability. A comprehensive crypto bill was drafted, listed for introduction in Parliament in 2021, and never introduced. It has since been shelved.

In its place, a different structure is taking shape. Talks ahead of Union Budget 2026-27 point towards a multi regulator model. SEBI would oversee exchanges and tokens that behave like securities. The RBI would handle cross border flows and foreign investment links. The Finance Ministry would keep control of tax policy. None of this is law yet. It is the direction the conversation is heading. SEBI and the RBI are also exploring sandbox programmes for DeFi, NFTs and smart contracts, a signal that oversight and experimentation are being built side by side rather than one after the other.

Meanwhile the RBI is building its own digital currency, the Digital Rupee, in pilot since late 2022 across both wholesale and retail formats. In April 2026, the RBI pushed the government to advance a proposal linking CBDCs across BRICS economies, to ease cross border trade and reduce reliance on the US dollar. Read together, the strategy is consistent: tax and monitor private crypto closely, while building a state backed alternative alongside it.

For founders, developers, investors and enterprises working in India’s Web3 sector, three things matter now. Taxation is settled and unlikely to soften soon; industry appeals for loss set offs and a lower TDS have been raised at every budget since 2022 and have gone nowhere. Compliance is the fast moving part, with reporting rules tightened twice in two years and still heading only towards more disclosure. And the regulatory architecture, SEBI, RBI and the Finance Ministry sharing oversight, is still being negotiated. Whoever builds compliance tools and market infrastructure around VDAs today is building for a rulebook that has not been finalised.

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