12 crypto tax myths in India, busted
No tax until you cash out to INR? The 87A rebate wipes it out? Fees are deductible? The most common crypto tax myths in India, and what the rules actually say.
- Checked against the rules: Jun 2026
- Sources cited · No buy or sell calls
- Tax year 2026–27
Crypto tax in India is strict, and forums are full of confident advice that turns out to be wrong. These are the myths we see most often in Indian crypto communities, with what the rules actually say.
Myth 1: "No tax until you convert to rupees"
Wrong. Tax applies when you transfer a virtual digital asset. Swapping ETH for USDT, or buying an NFT with SOL, is a transfer. The gain is measured in rupees at the time of the swap. See how to report a crypto swap.
Myth 2: "My income is below ₹2.5 lakh, so my crypto gains are tax-free"
Wrong. The 30% rate applies to crypto gains regardless of your other income. The basic exemption limit can't be used against it.
Myth 3: "The Section 87A rebate brings my crypto tax to zero"
Wrong. A tax tribunal has held that the rebate can't be claimed against tax on VDA income, because the VDA provisions bar it. The Finance Act, 2025 then made the rule explicit: from the 2026–27 assessment year onwards, the rebate isn't available against income taxed at special rates. Low earners still pay 30% on crypto gains.
Myth 4: "I don't need to file an ITR because my income is low"
Risky. If TDS was deducted on your crypto sales, filing a return is the only way to get it back. Many people who skip filing lose money they're owed. See how to get your TDS refund.
Myth 5: "TDS is an extra 1% tax"
Wrong. TDS is an advance payment credited against your final tax. If it's more than your tax, the excess is refunded. Estimate yours with the TDS refund estimator.
Myth 6: "I can deduct exchange fees and gas"
Wrong. Only the cost of acquisition can be deducted. Trading fees, withdrawal fees, gas, internet and software are not allowed.
Myth 7: "Losses cancel out my gains"
Wrong. A loss on one crypto can't be set off against a gain on another, even within the same year, and can't be carried forward. See crypto losses in India.
Myth 8: "I have to report crypto I'm only holding in Schedule VDA"
No. Schedule VDA is for transfers. Coins you bought and held, including in a self-custody wallet, don't go there until you sell, swap or spend them. Holdings on foreign exchanges are a separate question; see Schedule FA.
Myth 9: "P2P and cash trades can't be traced"
Wrong, and dangerous. Blockchains are public, exchanges keep KYC records, and bank trails are investigated in fraud cases. Untaxed gains are still taxable, and P2P trades carry the risk of frozen bank accounts.
Myth 10: "Offshore exchanges aren't taxed in India"
Wrong. Residents are taxed on worldwide income, and international information exchange, including the OECD's crypto reporting framework, is making offshore activity visible.
Myth 11: "Airdrops are free, so they're tax-free"
Wrong. Tax professionals disagree on exactly when airdrops are taxed, but they are taxable. See airdrop tax in India.
Myth 12: "Crypto futures are taxed exactly like spot trades"
It depends. There's no official guidance, and the treatment may differ between INR-settled and crypto-settled contracts. Read crypto futures and options tax before you file.
The bottom line
When in doubt, assume a transfer is taxable, keep records in rupees, claim every rupee of TDS, and file. For everything in one place, read the complete crypto tax guide.
Frequently asked questions
Where do these myths come from?
Mostly from comparing crypto with shares, where losses can be set off and exemptions apply, and from advice that predates the 2022 rules.
Who should I ask when I'm unsure?
A chartered accountant who regularly handles crypto. Crypto tax is niche enough that general advice can be wrong.
Sources
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