VDA Full Form: Virtual Digital Asset

The definition sits in Section 2(47A) of the Income-tax Act, and it is deliberately wide. It reaches information, a code, a number or a token that carries a digital representation of value and can be transferred, stored or traded electronically. Non-fungible tokens are named separately inside the same clause, so they are covered without having to fit the general wording at all.

One thing the clause does not turn on is how the asset was produced. It reaches assets generated by cryptographic means or otherwise, so a token built some other way is not outside the definition for that reason. What decides the answer is what the thing represents and whether it moves electronically. You can read the Act at the Income Tax Department source.

The list is not closed. The Central Government can notify further assets into the definition, and it can notify things out of it, which is how gift cards, vouchers and mileage points ended up excluded. Indian currency and foreign currency were never inside it to begin with, so the rupee balance sitting in your exchange wallet stays out.

That matters for anything new. A token that did not exist when the clause was drafted is still inside the definition if it fits the wording, because the clause describes a shape rather than a list of names.

Once something is a virtual digital asset, transferring it triggers Section 115BBH. The gain is taxed at a flat 30%, health and education cess of 4% is added to that tax rather than to the gain, and cost of acquisition is the only deduction. Sell a coin that cost ₹1,40,000 for ₹2,00,000 and the ₹60,000 gain carries ₹18,000 of tax with ₹720 of cess on top, so ₹18,720 in all.

Two restrictions come with it. A loss on a VDA transfer cannot be set off against anything, inside crypto or outside it, and it cannot be carried forward. Separately, Section 194S takes 1% of the consideration at the moment of the transfer, which is a credit against the liability rather than an extra charge. The clause-by-clause reading sits in the Section 115BBH entry, and the full arithmetic with a worked trade sits on the India crypto tax page.

Disposals are reported in Schedule VDA, one row per disposal, inside ITR-2 or ITR-3. Each row carries the date of acquisition, the date of transfer, the head of income, the cost and the consideration. The column list is set out in the Schedule VDA entry, and the filing mechanics are on the India page.

The same term shows up outside the return as well. Your Annual Information Statement carries a line for receipts on transfer of a virtual digital asset, drawn from what exchanges and other deductors have reported, and Form 26AS carries the tax deducted against those transfers.