There seems to be a lot of crypto investors in the Indian market who hold the position that the new tax law says they will only be taxed when “cashing out” to Indian Rupees (INR). This is untrue. Under the new law, you will also be required to pay if you swap Bitcoin (BTC) for Ethereum (ETH), or any other Virtual Digital Asset (VDA) for another.
The 30% Flat Tax Rule
A section in the Income Tax Act (115BBH) states that investors have to pay a 30% on any transfer of VDA. The definition of transfer used by this law is very broad and includes swapping one crypto for another as well as selling crypto for fiat currency.
How to Calculate Gains on a Swap
As an Indian investor, figuring out what the taxable gain is in this scenario is important. Based on this law, the taxable gain is defined as the “sale price” or Fair Market Value (FMV) of the crypto you got at the precise time of the transaction. For example, if Token A is purchased for ₹40 Lakh and then swapped later for Token B while Token A is worth ₹60 Lakh, the investor made a profit of ₹20 Lakh, and this will be the taxable gain, where the 30% will be paid.
The 1% TDS Impact
The law also introduces a 1% Tax Deducted at Source (TDS) that is applicable for VDA transfers above a limit (often ₹10,000 or ₹50,000 in a financial year). Since both sides are technically “sellers” during a swap, Indian exchanges often remove the TDS portion from the crypto to be converted itself.
The “No Loss Offset” Pitfall
There is no loss offset provision in this law. This means you cannot offset losses from one trade with profits from another.
Disclaimer: BFM Times acts as a source of information for knowledge purposes and does not claim to be a financial advisor. Kindly consult your financial advisor before investing.
