Taxation of Virtual Digital Assets


Status as on- 10/07/2023


“[Virtual currencies] may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.”

—Ben Bernanke


India is the country with the largest number of cryptocurrency owners worldwide. The bitcoin technology (Crypto-Tech) sector in India has experienced tremendous expansion, according to the NGO NASSCOM and cryptocurrency exchange platform WazirX. In the next ten years, it is expected that Indians would invest about 241 million dollars in the cryptocurrency sector.

Virtual Digital Asset (VDA)

According to the Income tax act, of 1961, ‘virtual digital asset’ refers to any information, code, number, or token (not being Indian currency or foreign currency) generated through cryptographic means or otherwise and can be called by whatever name. It can be transferred, stored, or traded electronically. Cryptocurrencies, non-fungible tokens (NFTs), and decentralized finance are some examples of virtual digital assets.

Taxation framework of virtual digital assets (VDAs)

  • VDAs have grown in popularity in recent years, and the number of users is also growing.
  • In her Union Budget 2022 speech, the Hon’ble Finance Minister stated that the scale and frequency of transactions in the VDA market made it necessary to legislate for a special tax structure. In light of this, a new taxation system for VDAs was proposed in the Finance Bill 2022 to provide for VDA taxation and withholding.
  • The Indian Finance Budget has introduced a 30% flat tax on revenue from crypto transactions, with no deductions and no set-off of losses against any income. In addition, there is a 1% TDS on every transaction, which has become mandatory.

When and who are excluded from TDS

In the following cases, no tax shall be deducted under this clause.

  • If the aggregate value of the consideration does not exceed Rs.10,000 by any person (other than a specified person) throughout the fiscal year.
  • If the consideration aggregate value does not exceed Rs.50, 000 throughout the fiscal year payable by the designated individuals.


The introduction of tax standards surrounding cryptocurrencies has given the industry some hope and cheer that cryptocurrencies will continue to be available as an investment opportunity in India. There are a few crucial steps, such as capability and skills building, that can be taken right away to capitalize on and shape this new era.  The recent insertion of clause (47A) in the Finance Bill 2022 under Section 2 of the Income Tax Act has only improved the reliability of digital assets, therefore boosting their use.

Disclaimer: The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinions before relying upon the article. For more information, please contact us at

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