Section 115BBH of the Income Tax Act introduced India's flat 30% tax on virtual digital asset (VDA) gains in Budget 2022. It's the most aggressive crypto tax regime in any major economy, and every P2P trader needs to understand exactly how it bites.
What's taxed
Any 'transfer' of a VDA — selling, swapping, gifting, paying in crypto — is a taxable event. The gain = sale consideration minus cost of acquisition. There's no holding-period distinction; long-term and short-term are taxed identically at 30%.
Cost of acquisition includes only what you actually paid for the asset. Mining costs, gas fees, exchange fees — none of them are deductible. The Finance Ministry's stated position is that the 30% is on the full gain with no associated expense allowance.
What you can't do
You cannot offset crypto losses against any other income — not salary, not capital gains on stocks, not even crypto gains from a different transaction. Each profitable trade is taxed in isolation; losing trades simply get ignored.
You cannot carry losses forward to future years. A bad year is just a bad year.
You cannot use indexation to adjust your cost basis for inflation, even if you held for 5 years.
How it applies to P2P
When you sell USDT on P2P for INR at a higher rate than you bought it, that's a gain. 30% of the gain plus the 4% Health & Education cess = 31.2% effective tax. The 1% TDS the platform or counterparty deducted is credited against this final liability — it doesn't replace it.
Tracking is on you. P2P platforms don't issue capital-gains statements; you reconstruct the trade history from your trade exports and bank statements.
Frequently asked
- What if I just hold and never sell?
- No tax. Tax triggers on transfer (sale, swap, payment). Pure holding is untaxed.
- Is gift of crypto taxed?
- Yes — both the giver (transfer event) and receiver (other-source income, depending on relationship) can be taxed. The relative-exemption under Section 56 covers gifts from close relatives.
Key takeaways
- Section 115BBH = flat 30% + 4% cess on VDA gains; no slab benefit even if your other income is in lower brackets.
- No expense deductions, no loss offset, no carry-forward, no indexation.
- 1% TDS is credited against the 30% final tax — it isn't a final tax in itself.
- Tracking the trade history is your responsibility.
