How an NRI is taxed on crypto and other virtual digital assets in India

Most Indian assets — shares, mutual funds, property — are taxed on a sliding scale, let you offset losses, and reward holding for the long term. Virtual digital assets are governed by a separate, deliberately strict regime, and it ignores all of that.

The first rule is a flat 30% rate on the gain when you transfer a VDA (Section 115BBH), regardless of how long you held it or what slab your other income sits in. Surcharge and cess apply on top. The second rule is that no deduction is allowed except what you paid to acquire the token — no exchange fees, no interest, no other expenses come off the gain. The third rule is the one that catches people: losses cannot be set off and cannot be carried forward. A loss on one coin does not reduce a gain on another, and it does not roll into next year.

The practical effect is that crypto is taxed transaction by transaction on the upside, with none of the smoothing that other investments get. Two trades in the same year — one up, one down — are taxed only on the one that went up.

Separate from the 30% on gains, a transfer of a VDA carries tax deducted at source. The figure people know is 1% under Section 194S — but that 1% is written for a transfer to a resident seller. When the seller is a non-resident, the deduction runs instead under Section 195 at the rate in force, which tracks the flat 30% (plus surcharge and cess), even though in practice many Indian exchanges still cut only 1% on everyone. The selling section further down unpacks that gap; what matters here is what the deduction is for.

Whatever was taken is not an extra tax. It is an advance against your final liability: it shows up in your tax records, and you adjust it against the 30% you actually owe when you file. If too much was deducted across many trades — easy to happen if you trade often, since 1% is taken each time — the excess comes back as a refund once the return is filed.

Where the rules get fiddly is peer-to-peer transfers, foreign platforms, and trades where no Indian intermediary is in the middle. There, the obligation to deduct can fall differently, and a non-resident moving tokens between wallets needs to know whether a 194S deduction was missed rather than simply assume the exchange handled it. This is one of the places a CA earns their keep — reconciling what was actually deducted against what the return needs to show.

Living abroad does not automatically put your crypto outside India's reach, and it does not automatically pull all of it in either. The answer turns on your residential status for the year and on where the income is treated as arising.

As a non-resident, India taxes income that is received in India or that accrues or arises in India. Gains realised on an Indian exchange, or from VDAs otherwise connected to India, generally fall within that net even though you live overseas. Income with no Indian source — say, trading on a purely foreign platform while you are a non-resident — is a different question and may sit outside India's claim. The line is not always obvious, which is exactly why it should be settled before you transact rather than argued afterwards.

The other half of the picture is your home country. Many countries tax their residents on worldwide crypto gains too, so the same disposal can be looked at by two tax systems. India's side is what a practising CA here handles — the 30% computation, the TDS reconciliation and the Indian return. How your country of residence treats the gain, and whether a tax treaty offers any relief, is settled on that side with your foreign adviser.

Karan moved to Germany in 2024 and is a non-resident for the year. He still has two holdings on an Indian exchange: one coin he bought for ₹4 lakh and sells for ₹10 lakh, and another he bought for ₹3 lakh and sells for ₹1 lakh.

The winning trade has a ₹6 lakh gain, taxed at a flat 30% under Section 115BBH — about ₹1.8 lakh before surcharge and cess. The losing trade has a ₹2 lakh loss, and here the regime bites: that loss cannot be set off against the ₹6 lakh gain and cannot be carried forward, so it simply does not reduce his tax. Karan pays the 30% on the full ₹6 lakh as if the second trade never happened.

On each sale the exchange deducted 1% under Section 194S — roughly ₹11,000 across the two transactions — which is credited against his liability when he files. Because these are Indian-exchange disposals connected to India, the gain falls within India's net even though Karan now lives in Germany. His CA computes the ₹6 lakh gain, applies the 30%, sets the 194S credit against it, and files the Indian return; how Germany then treats the same gain is handled separately on the German side.

It is worth pressing on the no-set-off rule, because it surprises people who are used to how shares work. With listed shares, a loss on one stock reduces the gain on another, and an unused loss can be carried forward for years. The VDA regime under Section 115BBH switches all of that off.

Each gain is taxed on its own at 30%. A loss on Coin A does not reduce a gain on Coin B in the same year. It does not reduce gains on the same coin in a later year either, because it cannot be carried forward. And it certainly cannot be set against your salary, rent or other income. The loss, in tax terms, evaporates.

The "only cost of acquisition is deductible" rule is just as tight. What you paid to buy the token comes off the sale value; almost nothing else does. The list of things that do not reduce the gain is long:

The takeaway for someone trading actively from abroad is that the tax tracks your winners gross and ignores your losers entirely. Two people who end the year flat — one through a single break-even trade, one through a big win cancelled by a big loss — face very different bills. The second pays 30% on the win with no credit for the loss. Knowing this before you trade, rather than at filing, is the whole point.

The earlier example showed a 1% deduction, but for a non-resident that figure deserves a second look — because the 1% and the rate a non-resident actually faces live in two different sections.

The 1% is Section 194S, and it is written for a transfer to a resident seller. When the seller is a non-resident, the payment is being made *to* a non-resident, so the law points instead to Section 195, where tax is withheld at the rate in force — for crypto that tracks the flat 30% under Section 115BBH (plus surcharge and cess), not 1%. In practice some Indian exchanges still deduct only 1% on every seller regardless, which is exactly why a non-resident should not assume the 1% they see is the end of it. Whichever was taken, it is an advance — credited back when you file — not a final tax.

The other thing that trips people up is who was supposed to deduct, because it changes with how you transact:

On a registered Indian exchange the platform deducts and deposits it for you, so it appears in your tax records without you lifting a finger; keep your PAN linked, because a missing PAN pushes the rate higher still. In a peer-to-peer deal with no exchange in the middle, the obligation can fall on the buyer and in practice often simply doesn't happen. And a crypto-for-crypto swap is a transfer too — no rupee changes hands, but the deduction rule still applies. When the return is prepared, the CA reconciles what was actually deducted against every trade, claims the full credit you are owed, and flags anything that was missed before it becomes the department's question rather than yours.

Not all crypto arrives by purchase. Tokens land in your wallet as a gift, as an airdrop from a project, or as a staking or mining reward — and the tax on these is a separate event from any later sale, taxed differently and at a different time.

When you receive the tokens for free, the value is generally taxed as income at the moment they hit your wallet, at the fair market value in rupees on that date — not at the flat 30%, but at your normal slab rates, because this is income received rather than a gain on a transfer. For a gift, the long-standing rule applies: a gift of a VDA from someone who isn't a close relative is taxed once its value crosses ₹50,000 in the year (Section 56(2)(x)), while a gift from a specified relative, or on an occasion like marriage, stays exempt. Airdrops, staking and mining rewards are valued at receipt the same way and taxed as income for that year.

The second event comes later. When you eventually sell crypto you received this way, the gain is taxed again at the flat 30% under Section 115BBH — and the value that was already taxed as income on receipt is generally treated as your cost of acquisition, so you should not be taxed twice on the same slice. Keep the receipt-date valuation on record: that figure is what protects you. For an NRI, two questions sit on top of all this: whether the receipt has an Indian source at all, and your residential status in the year it landed. Getting the receipt year and the value right is what keeps the later sale clean.

If you hold crypto in a foreign wallet or on an overseas exchange, two separate questions arise — whether you have to disclose it in your Indian return, and whether holding it abroad is allowed under India's foreign-exchange law. The good news for a genuine non-resident is that the disclosure question is usually the easier one.

Schedule FA — the part of the return where foreign assets are declared — applies only to someone who is a resident and ordinarily resident. A non-resident, and someone in the RNOR phase just after returning, is not required to report foreign assets in Schedule FA. So while you are an NRI, an overseas crypto wallet generally does not need to go into Schedule FA at all. The trigger to watch is the year you return to India for good: once you become ordinarily resident again, foreign assets — including crypto held abroad — come into Schedule FA, and the penalties for leaving them out (under the Black Money Act) are heavy. The mistake to avoid is carrying the NRI-era habit of non-disclosure into the first resident year.

The FEMA side is about whether you may hold the asset abroad, not about disclosure. An NRI is not boxed in by the same foreign-exchange limits that bind a resident — there is no Liberalised Remittance Scheme cap on what a non-resident can hold or invest overseas — so a foreign wallet you funded with money already abroad sits in a far simpler position than a resident's would. The area is still settling, and Indian-exchange holdings raise their own FEMA questions, which is why the residential-status timing and the source of the funds are worth confirming with a CA before you move money or change status.