What are Virtual Digital Assets (VDA)?#
The term Virtual Digital Assets (VDA) was introduced in the Union Budget 2022-23 to bring cryptocurrency, NFTs, and similar digital assets under a clear tax framework in India. Section 2(47A) of the Income Tax Act defines VDA as:
"Any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value..."
In plain terms: Bitcoin, Ethereum, USDT, NFTs, other cryptocurrencies, and similar digital tokens = VDA.
VDA Tax Rate#
| Aspect | Rule |
|---|---|
| Tax Rate | 30% flat (plus surcharge + 4% cess) |
| No deductions allowed | Only cost of acquisition can be deducted |
| No indexation | Cost is not inflation-adjusted |
| No loss set-off | VDA losses cannot offset other income |
| No carry-forward | VDA losses cannot be carried forward |
| TDS on transfers > ₹10,000 | 1% TDS u/s 194S by the exchange/buyer |
What This Means Practically#
If you bought Bitcoin worth ₹1 lakh and sold it for ₹1.5 lakh:
- Gain = ₹50,000
- Tax = 30% × ₹50,000 = ₹15,000 (+ cess = ₹15,600)
- No deductions (no brokerage, no gas fees, only purchase cost)
- If you also had a ₹20,000 loss from another crypto → cannot set off
No Loss Set-Off — A Critical Rule#
If you have:
- ₹1 lakh profit from selling ETH
- ₹50,000 loss from selling a failed altcoin
You cannot net them. You pay 30% on the ₹1 lakh profit (₹30,000 tax), and the ₹50,000 loss is wasted — it cannot reduce your tax liability.
Within VDA: Even VDA-to-VDA losses cannot offset VDA profits.
TDS Under Section 194S#
When you sell crypto:
- Indian crypto exchanges (Coinbase India, WazirX, etc.) deduct 1% TDS on transactions > ₹10,000/year
- This TDS appears in your Form 26AS
- Claim it as a credit when filing ITR — it reduces your final tax liability
For peer-to-peer transfers > ₹10,000, the buyer is responsible for deducting 1% TDS.
How to Report VDA in ITR#
- ITR-2 (if no business income) or ITR-3 (with business income)
- Schedule VDA — introduced from AY 2023-24
- Report each transaction: date of acquisition, cost of acquisition, date of transfer, sale consideration
- Calculate gain/loss per transaction
- Total tax at 30%
What Counts as a Taxable VDA Event?#
✅ Selling crypto for INR ✅ Trading one crypto for another (crypto-to-crypto is a transfer!) ✅ Using crypto to buy goods/services ✅ Receiving crypto as salary or gift ❌ Holding crypto (no taxable event) ❌ Transferring between your own wallets