Published 8 August 2026
6 min read
Written and maintained by the CryptoKar team
Glossary
Section 115BBH of the Income Tax Act
Section 115BBH of the Income-tax Act, 1961 charges income from the transfer of a virtual digital asset at a flat 30%, with 4% health and education cess on top of that tax. It allows one deduction, the cost of acquisition, and it switches off set-off and carry-forward of a VDA loss.
Key highlights
Three figures carry the whole section.
- 30%
Flat, whatever the gain and whatever your slab
Sub-section (1)
- One
Deduction allowed, the cost of acquisition
Section 115BBH(2)(a)
- Nil
Set-off and carry-forward of a VDA loss
Sub-section (2)
What Section 115BBH Charges
The section reaches one thing: income from the transfer of a virtual digital asset. Everything turns on that phrase. What counts as a virtual digital asset is decided elsewhere, in Section 2(47A), and this section simply takes whatever lands inside that definition and applies a rate to the gain on transferring it.
A transfer is the trigger, not a profit on paper. The word does a lot of work here, because a swap counts even though no rupees changed hands, and so does paying a merchant in crypto. A position that has doubled in value and has not been sold produces nothing for this section to charge. You can read the Act at the Income Tax Department source.
The Section Read Part by Part
Most explanations list the outcomes. It is more useful to see which part of the section produces each one, because the restrictions are what make this provision harsher than the rest of the Act, and they live in a separate limb from the rate.
Sub-section (1)
The charge
- Income from the transfer of a virtual digital asset is taxed at 30%.
- The rest of your total income is taxed under the ordinary provisions.
- No holding period, no indexation and no concessional rate sit inside it.
Sub-section (2)
The restrictions
- Clause (a): no deduction is allowed except the cost of acquisition.
- No allowance and no expenditure comes off, whatever it was spent on.
- A loss on a VDA transfer is not set off against any income.
- An unused VDA loss is not carried into the next year.
One filer, ₹7,00,000 of total income
- Salary of ₹6,00,000
- Ordinary slabs
- VDA gain of ₹1,00,000, taxed at 30%
- ₹30,000
- Cess at 4% on ₹30,000
- ₹1,200
- Tax on the VDA leg
- ₹31,200
The 4% cess in that third row is levied by the annual Finance Act rather than by Section 115BBH, which is why it sits outside both limbs above. The salary leg carries no figure here, because the amount depends on the regime and the deductions claimed. The VDA leg does not: 30% of ₹1,00,000 is ₹30,000 whatever the rest of the return looks like. Surcharge applies on top at higher total incomes.
The Flat Rate Ignores Your Slab
Flat means flat. The rate does not step up with the size of the gain and it does not step down with a small total income, so a retired filer and a full-time trader meet the same percentage on the same profit. The basic exemption limit shelters none of the VDA leg either, which surprises people whose other income sits below it.
Cess is where the arithmetic goes wrong most often. The 4% attaches to the tax figure, so a ₹50,000 gain produces ₹15,000 of tax and ₹600 of cess, giving ₹15,600 rather than ₹17,000. Surcharge then sits on top at higher total incomes and follows the ordinary surcharge slabs.
Section 115BBH, applied to your own history
Upload your exchange files and the engine applies the rate, the cess and the restrictions in the order the section sets them out.
- CoinDCX
- WazirX
- Binance
- Bybit
Cost of Acquisition Is the Only Deduction
Section 115BBH(2)(a) allows the cost of acquisition and shuts out every allowance and every expenditure beyond it. There is no category test to argue about, because the restriction is not framed by category: whatever the outgoing was for, and however clearly it relates to the trade, it stays with you rather than coming off the gain.
One practical consequence follows from that. A purchase lot you cannot evidence has a cost of zero as far as the computation is concerned, so the whole sale value becomes the gain and 30% plus cess runs against money you never made. Complete acquisition records are worth more here than in any other part of the return.
Losses Go Nowhere Under Section 115BBH
A loss on one coin does not reduce the gain on another. It does not touch your salary, your business income or your equity capital gains, and it does not carry into next year. The section computes each profitable disposal on its own and discards the rest, so a year that ended flat overall can still produce a bill.
This is also why the loss-harvesting playbook that works for equities does nothing for a VDA. Selling a losing position before year end creates no relief, because there is nothing for the loss to attach to. The worked comparison on the India page shows the gap between what people assume and what the section does.
Section 115BBH Against Ordinary Capital Gains
The clearest way to read the section is next to the rules it replaces. Every row below is a relief that exists for an ordinary capital asset and does not exist for a virtual digital asset.
| Aspect | Section 115BBH | Ordinary capital gains |
|---|---|---|
| Rate | Flat 30%, plus 4% cess on the tax | Slab rate or a concessional rate, depending on the asset and the holding period |
| Long term versus short term | No distinction. A coin held for five years is taxed like one held for five minutes | Holding period changes both the rate and the treatment |
| Indexation | Not available | Available on some long-term assets |
| Deductions | Cost of acquisition only | Cost of acquisition, cost of improvement and expenditure on the transfer |
| Set-off of losses | None, inside crypto or outside it | Capital losses set off against capital gains under the ordinary rules |
| Carry-forward | None | Unabsorbed capital losses carry forward under the ordinary rules |
Which Years Section 115BBH Governs
The section was inserted by the Finance Act 2022 and applies from assessment year 2023-24, which is financial year 2022-23. It governs every year from then through FY 2025-26, the year most filers are working on now.
From 1 April 2026 the Income Tax Act 2025 replaced the 1961 Act. Budget 2026 left the 30%, the 4% cess and the 1% deduction at source unchanged, and TDS on a VDA transfer now sits in Section 393(1). The clause number that carries the 30% charge forward is still being confirmed, so this page names the charge rather than guessing at the new numbering. What changed on 1 April 2026 sets out the rest of the transition.
Frequently Asked Questions
The questions that follow from reading the section itself.
This page states the law and what CryptoKar computes from your trade history. It is not tax advice. Judgment calls belong with a chartered accountant. Sections and dates here were read against the source on 21 August 2026.
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