A surprisingly common belief: 'P2P is direct between two people, the exchange just escrows, so it's not taxable like an exchange trade.' This is wrong, and it's an expensive mistake.
The law is venue-agnostic
Section 115BBH applies to any 'transfer' of a VDA. The Act does not distinguish between exchange-matched trades, P2P trades, OTC desk trades, DEX swaps, or wallet-to-wallet sales. If a VDA changed hands and you received consideration, the gain is taxed at 30%.
TDS under 194S is similarly venue-agnostic. The 1% applies to every transfer above the threshold; the only difference is who deducts and remits.
Why people get this wrong
On exchange-matched spot, the exchange does the bookkeeping for you — issues a trade history with PnL, deducts TDS automatically, and reports to the AIS. P2P does none of that, so people assume the lack of paperwork means no tax. It just means you have to do the paperwork yourself.
Key takeaways
- P2P trades are taxed identically to spot under Section 115BBH (30% flat).
- TDS under 194S applies regardless of venue.
- Lack of automatic exchange paperwork ≠ no tax; you're just on the hook to track it.
