Crypto tax in India for operators in 2026: VDA tax, TDS and reporting

An exchange, or any other operator paying an Indian resident for a virtual digital asset in 2026, deducts 1% TDS under section 393(1), Table Sl. No. 8(vi) of the Income-tax Act 2025 (formerly section 194S), at credit or payment on the net consideration, then deposits, reports and certifies it on the department’s calendar. The seller’s gain is taxed at a flat 30% under section 194(1), Table Sl. No. 4 (formerly section 115BBH). From 1 April 2026 a prescribed reporting entity also files a crypto-asset transaction statement under section 509.

Schedule A: what a VDA operator owes, and under which section

The Income-tax Act 2025 (Act 30 of 2025) came into force on 1 April 2026 and renumbered every provision operators had learned under the 1961 Act. The rates did not move: the 2026 Budget left the 30% charge and the 1% TDS unchanged. What moved is where they live, and the Finance Act 2026 substituted the late-statement fee section (s.427) and the crypto-asset reporting penalty section (s.446) from the same day. A virtual digital asset is defined in section 2(111), with limb (d) catching any crypto-asset that relies on a cryptographically secured distributed ledger; the PMLA borrows the definition, so the AML perimeter we set out in FIU-IND registration for crypto businesses in India tracks the tax perimeter exactly.

Form numbers below are the ones the Income Tax Department describes in its own VDA TDS tutorial, which states the 1961 Act and 1962 Rules as amended by the Finance Act 2026; they are attributed to the department, not cited as 2026 Rules.

Schedule A · Operator obligations under the Income-tax Act 2025, as at 29 September 2026
Obligation	Provision (2025 Act, old number)	Rate, threshold or amount	Who bears it	Forms, timing and the cost of default
Tax on VDA transfer income	s.194(1) Table Sl. No. 4 (formerly s.115BBH); s.194(2)(n) applies “transfer” to any VDA, capital asset or not	30%, plus surcharge and cess; only cost of acquisition deductible; no set-off or carry-forward of loss	The transferor: the operator on its own book, a founder on an allocation, a user	Returned by the transferor; trading stock and capital holdings are both caught
TDS on VDA consideration	s.393(1) Table Sl. No. 8(vi) (formerly s.194S); thresholds in s.393(4) Table Sl. No. 12	1% of net consideration after GST and the deductor’s charges, no surcharge or cess; 20% where the payee has no PAN (s.397(2)); exempt at or below Rs 50,000 a year from a small individual or HUF payer, Rs 10,000 from any other payer	The person responsible for paying a resident, at credit or payment, whichever is earlier: the exchange when it pays the seller directly, the buyer in an OTC or peer-to-peer deal. Every deductor except a small individual or HUF payer obtains a TAN (s.397(1)(c)(ii))	Department’s forms: Challan ITNS 281 within 7 days of month end (March by 30 April); quarterly Form 26Q; Form 16A within 15 days of the statement due date. Specified persons: Form 26QE within 30 days of month end, then Form 16E
In-kind and written-agreement cases	Note 6 to the s.393(1) Table; CBDT Circular 14/2022 of 28 June 2022; Circular 13/2022 as restated in the department’s VDA TDS tutorial	Same 1%; where consideration is in kind or the cash leg cannot cover the tax, the payer ensures the tax is paid before releasing the VDA	The exchange where a written agreement moves the duty to it or it sells its own VDA; both parties on an off-exchange swap	Quarterly Form 26QF; the Circular 13/2022 conversion mechanism for tax withheld in kind; s.448 penalty of up to the tax for failing to ensure payment
TDS default	s.398(1), (3), (4) (formerly s.201); s.448 (formerly s.271C); s.427 (formerly s.234E, substituted by the Finance Act 2026 from 1 April 2026)	Interest at 1% a month from deductible date to deduction, 1.5% from deduction to payment; penalty of up to the tax not deducted, at the Assessing Officer’s discretion (s.448); Rs 200 a day for a late statement, capped at the tax deductible	The deductor, deemed an assessee in default, including a company’s principal officer	Interest is paid before the statement is filed; unpaid TDS is a charge on all the deductor’s assets; relief under s.398(2) only where the payee has returned and paid the tax and an accountant’s certificate is furnished
Crypto-asset transaction reporting	s.509(1) to (6); s.446 (substituted by the Finance Act 2026 from 1 April 2026); “crypto-asset” per s.2(111)(d)	Rs 200 a day for a late statement; Rs 50,000 for uncorrected inaccurate information or a due-diligence failure	A prescribed reporting entity; the CBDT’s 24 July 2026 Guidance Note describes a reporting crypto-asset service provider	Annual Form 167 by 31 May for the previous calendar year, first due 31 May 2027; 30 days to cure a defect, up to 30 days on a notice to file, 10 days to report an inaccuracy
FIU-IND overlay	PMLA 2002 reporting-entity registration; FIU-IND AML and CFT guidelines for VDA service providers, 8 January 2026	No monetary threshold on Travel Rule information or STRs	Any entity performing a notified VDA activity for Indian users, wherever it is incorporated	Monthly report to FIU-IND; records kept five years; the registration document set includes the VDA TDS forms. See the FIU-IND registration service

Who deducts the 1% TDS: the department’s map

The statute is short: the person responsible for paying consideration for the transfer of a VDA to a resident deducts 1% at credit or payment, whichever comes first. The Income Tax Department’s tutorial on VDA TDS fills in who that person is. In an over-the-counter or peer-to-peer deal the buyer deducts, deposits and files the quarterly statement, as CBDT Circular 14/2022 of 28 June 2022 records. Where the exchange pays the seller directly, the exchange deducts. Where a broker sits between exchange and seller, both are liable unless a written agreement places the duty on the broker alone. Where the exchange sells its own VDA, the buyer or broker deducts unless the exchange agrees in writing to pay the tax by the quarterly due date. In a VDA-for-VDA swap both parties deduct unless the exchange takes it on under a written agreement, and a payment gateway does not deduct where the deductor already has.

Three operational rules follow. TDS is computed on the net consideration after GST and the charges the deductor levies for its own service. Intra-day trading is not exempt: the department’s position is that tax is deducted every time a position is squared off. And the VDA TDS displaces the e-commerce operator TDS (Note 4 to the section 393(1) Table) and the purchase-of-goods TDS (Circular 14/2022, without deciding whether a VDA is goods), but it does not relieve the payee of its own duty on the reverse leg: a service provider paid in bitcoin deducts VDA TDS on the coins it hands over while the client may still deduct on the fee.

An exchange that takes the duty on by written agreement files a quarterly Form 26QF with counterparty, transaction and challan detail. Where it withholds tax in kind on a swap, Circular 13/2022 of 22 June 2022 prescribes the conversion: non-primary VDAs into primary VDAs such as BTC, ETH, USDT or USDC by immediate market order, primary VDAs into INR at the 00:00 hrs day close, the exchange never the buyer, a contract note to the customer, and the INR deposited by the TDS due date. Off-exchange, where consideration is in kind, each party pays and shows the other the challan before the VDAs are released.

Two boundaries. Where the seller is a non-resident, the department notes that tax may instead be deductible under the non-resident withholding provision (section 195 in the 1961 numbering), so residency is captured at onboarding. And whether a platform with no Indian presence is itself the person responsible for paying an Indian-resident seller is not addressed in any source this page relies on; the statutory words are “any person”, and the FIU-IND registration document set asks for the VDA TDS forms, which is as far as the record goes.

Crypto-asset reporting under section 509

The second obligation in force from 1 April 2026 is new to Indian law. Section 509(1) obliges a reporting entity, as may be prescribed, in respect of a crypto-asset to furnish a statement of crypto-asset transactions for the prescribed period, in the prescribed form, to the prescribed income-tax authority. Sub-sections (2) to (4) give the correction mechanics: 30 days to cure a defective statement, up to 30 days on a notice to a non-filer, and ten days to inform the authority of a discovered inaccuracy. Sub-section (5) empowers rules on registration, record-keeping and due diligence to identify any crypto-asset user or owner. Crypto-asset here takes the meaning in section 2(111)(d), the distributed-ledger limb of the VDA definition.

The CBDT’s Guidance Note of 24 July 2026 and the Form 167 calendar (calendar-year periods, statements due by 31 May of the following year, the first by 31 May 2027) are set out on our FIU-IND registration page; the penalties sit in section 446, substituted by the Finance Act 2026 from 1 April 2026: Rs 200 a day for a late statement and Rs 50,000 for an uncorrected inaccuracy or a due-diligence failure. The Act leaves the class of reporting entity, the period and the form to the rules, so an operator reads the Guidance Note against its own activity.

A compliance calendar for a registered VDA service provider

The dates below are the ones the department describes for VDA TDS, the statutory windows in section 509 and the Form 167 date on our FIU-IND page. Run them as one calendar: the FIU-IND registration file asks for the tax filings, and the tax file will be read against the FIU-IND monthly reports.

Before go-live: build the deductor role into the platform. Obtain the TAN. Capture PAN and tax residency at onboarding: no PAN means 20%, and a non-resident seller may fall under the non-resident withholding provision instead. Decide in writing who deducts in every broker relationship and on own-book sales. Compute TDS on net consideration after GST and platform charges, and build the Circular 13/2022 conversion where pairs settle in kind. Track the Rs 10,000 aggregate exemption for payers other than small individuals or HUFs, which a live account crosses quickly.
On every trade: deduct at credit or payment, whichever is earlier. Every intra-day square-off is a deduction event. In a VDA-for-VDA swap both legs carry tax unless the written agreement puts it on the platform. The VDA TDS displaces the e-commerce operator and purchase-of-goods TDS on the same transaction; the reverse leg keeps its own duty.
Monthly: deposit and report. Challan ITNS 281 within 7 days of month end, March by 30 April, as the department describes; a specified person uses the challan-cum-statement Form 26QE within 30 days of month end. File the monthly report to FIU-IND in the same cycle.
Quarterly: statements and certificates. Form 26Q, and Form 26QF for the quarter’s written-agreement transactions, by the due date; Form 16A to each payee within 15 days of the statement due date (Form 16E for specified persons). A late statement costs Rs 200 a day under section 427, capped at the tax deductible, and the fee is paid before the statement goes in.
Annually: the crypto-asset statement. Form 167 by 31 May for the previous calendar year; the first covers 2026 and is due by 31 May 2027. Keep the due-diligence file that identifies each crypto-asset user or owner, because section 446 charges Rs 50,000 for a due-diligence failure. Refresh the FIU-IND registration file with the year’s tax filings.
Within ten days of finding an error: correct it. Section 509(4) gives ten days to inform the authority of an inaccuracy in a filed statement. On the TDS side, a failure to deduct is cured under section 398(2) only where the payee has returned the income and paid the tax and an accountant’s certificate is furnished; interest at 1% and 1.5% a month is paid before the statement goes in. Where the Act names an accountant for that certificate, Infinilex’s chartered accountant signs it; the India-leg advice on the deductor question is signed by an advocate enrolled in India at Infinilex, and the deductor files its own statements as the statute requires.

The FIU-IND registration checklist carries the seven registration steps this calendar sits behind, and the FIU-IND registration service models the 30% charge, the 1% TDS and the reporting calendar into the product economics before the platform goes live.

Founder token allocations and the offshore entity

Two questions arrive with almost every launch mandate, and the Act does not say what founders hope it says. On allocations: section 17 of the Income-tax Act 2025, which defines perquisites, has no clause for virtual digital assets or tokens, and section 92 lists a virtual digital asset as “property” for the income-from-other-sources rules alongside shares, jewellery and bullion. So the receipt of a founder or team allocation is characterised on the facts under the general salary, perquisite and business-income rules, and no page can tell you in advance which applies to yours. The transfer side is fixed: when the allocation is sold, the income is taxed at 30% under section 194(1), Table Sl. No. 4 (formerly section 115BBH), only the cost of acquisition is deductible, a loss on one tranche cannot shelter a gain on another, and 1% TDS applies where a buyer or exchange is the person responsible for paying. Model the vesting schedule against that before the token schedule is public.

On the offshore entity: a UAE issuer is no more an exit from Indian tax than it is from the FIU-IND perimeter. Section 6(10) makes a company resident in India if its place of effective management, the place where the key management and commercial decisions necessary for the conduct of the business as a whole are, in substance, made, is in India in that tax year. We take that test and the free-zone side of it in UAE company run from India: POEM and QFZP, and the holding-company decision sits in cross-border structuring. The founders’ own shares in the issuer are an outbound investment with a filing trail, running through the LRS vs ODI analysis with Form FC and the annual performance report where the holding is ODI, and a late-submission-fee window before compounding where filings were missed. The Indian development company that builds the product for the issuer is a related party, priced and documented at arm’s length from day one. All three threads sit in launch order in Launching a token from India.

Frequently asked questions

What is the crypto TDS deduction duty for exchanges in India in 2026?

Where an exchange pays the seller directly, the Income Tax Department's tutorial says the exchange deducts. The duty sits in section 393(1), Table Sl. No. 8(vi) of the Income-tax Act 2025 (formerly section 194S): 1% of the net consideration after GST and the exchange's own charges, deducted at credit or payment, whichever is earlier, and 20% where the seller has not furnished a PAN. Where a broker sits between exchange and seller, both are liable unless a written agreement puts the duty on the broker alone. Every deductor other than a small individual or HUF payer obtains and quotes a TAN.

Does an offshore exchange deduct TDS on Indian users?

The statute puts the duty on the person responsible for paying a resident, and the Table names the deductor as any person. None of the official sources this page relies on addresses a platform with no Indian presence paying an Indian-resident seller, so no conclusion is stated here either way. Two points are settled: FIU-IND registration applies irrespective of where an entity is incorporated once it serves Indian users, and the registration document set asks for income-tax filings including the VDA TDS forms. Answer the deduction question on your own facts before you register.

Are founder token allocations taxable income in India?

The Income-tax Act 2025 has no clause written for founder or team tokens. Section 17, which defines perquisites, does not mention virtual digital assets or tokens, and section 92 lists a virtual digital asset as property for the income-from-other-sources rules alongside shares, jewellery and bullion. The receipt side therefore turns on the facts: what was given, by whom, for what and at what value. The transfer side is fixed: when the founder sells, the gain is taxed at 30% under section 194(1), Table Sl. No. 4 (formerly section 115BBH), with only the cost of acquisition deductible and no set-off or carry-forward of loss.

Who is a crypto-asset reporting entity in India from April 2026?

Section 509(1) of the Income-tax Act 2025 puts the duty on a reporting entity, as may be prescribed, in respect of a crypto-asset; crypto-asset takes the distributed-ledger limb of the VDA definition in section 2(111)(d). The CBDT's Guidance Note of 24 July 2026 describes a reporting crypto-asset service provider that runs customer due diligence, captures each user's tax residency and files an annual statement in Form 167 by 31 May of the following year, first by 31 May 2027. Because the Act leaves the class of entity to the rules, an operator reads the Guidance Note against its own activity rather than its label.

What happens if an Indian crypto exchange fails to deduct or deposit VDA TDS?

Under section 398(1) of the Income-tax Act 2025 (formerly section 201) the exchange, including its principal officer, is deemed an assessee in default for the tax. Interest runs at 1% a month from the date the tax was deductible to deduction, and 1.5% a month from deduction to payment, paid before the TDS statement is filed. Tax deducted but not paid is a charge on the deductor's assets. Under section 448 (formerly section 271C) the Assessing Officer may impose a penalty equal to the tax not deducted, and section 427 (formerly section 234E) charges Rs 200 a day for a late statement, capped at the tax deductible.

How is an Indian founder's offshore crypto entity taxed in India?

Under section 6(10) of the Income-tax Act 2025 a foreign company is resident in India if its place of effective management is in India in that tax year, meaning the place where the key management and commercial decisions necessary for the business as a whole are, in substance, made. A UAE issuer run day to day from India can therefore be an Indian resident for tax, whatever its licence says. The founder's own shares in that entity are an outbound investment under FEMA, through LRS or ODI, with Form FC and the annual performance report where ODI applies. Settle both before the entity is formed.

Next step

Running a VDA platform for Indian users, or planning a token allocation?

Send us the market structure in a paragraph: who pays whom, where the users sit, and whether any leg settles in kind. We will map the deductor role, the deposit and statement calendar, the section 509 file and the FIU-IND overlay into one plan before the first trade or the first vest.

Book a discovery call Run the FIU-IND registration checklist first

Crypto tax in India for operators in 2026: VDA tax, TDS duties for registered service providers and the new crypto-asset reporting