NRI Crypto Tax: Exemptions, Rates & Benefits in India
Sep, 28 2025
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Quick Take
- All crypto gains by NRIs are taxed at a flat 30% in India.
- No traditional NRI exemptions (like Section115F) apply to virtual digital assets.
- 1% TDS under Section194S kicks in for sales above ₹50,000.
- Acquisitions without purchase cost (airdrops, mining) are taxed at personal slab rates.
- Residency rule change in 2026 could pull global crypto gains into Indian tax net.
When it comes to Indian tax law, Non-Resident Indian (NRI) is a person of Indian origin who does not satisfy the residential criteria under the Income Tax Act. For many NRIs, crypto looks like a quick way to grow wealth abroad, but the tax side often feels like a maze. This guide breaks down exactly what the law says, where the exemptions are missing, and how you can stay compliant while minimizing the bite.
Understanding Indian Residency Rules
The starting point for any tax calculation is residency. Under the Income Tax Act (ITA), a person becomes a resident if they stay in India for 182 days in a financial year. From April12026, that threshold drops to 120 days **and** the individual must earn over ₹15lakhs from Indian sources.
Three buckets matter:
- Resident - taxed on global income.
- Resident but Not Ordinarily Resident (RNOR) - taxed only on Indian‑source income. Resident but Not Ordinarily Resident (RNOR) is a transitional status for people who have recently become residents or have limited Indian ties.
- Non‑Resident - taxed only on income that is sourced in India.
For crypto, the "source" question is still fuzzy. Most practitioners treat transactions executed on Indian exchanges as Indian‑source, while trades on overseas platforms stay outside the tax net - unless the person’s residency flips to Resident.
How India Treats Cryptocurrencies
The government classifies Bitcoin, Ethereum, NFTs and over 1,500 other tokens as Virtual Digital Asset (VDA) is any digital token that can be transferred electronically and holds market value. A 2022 amendment introduced a uniform 30% tax on any capital gain from VDA sales, irrespective of holding period - removing the long‑term vs. short‑term split that exists for stocks or real estate.
Key points of the VDA regime:
- Only the purchase price can be deducted; transaction fees, storage costs, and gas fees are **not** allowed.
- Losses from crypto cannot be set off against other income or even against gains from a different crypto token.
- For acquisitions without purchase consideration (mining rewards, airdrops, gifts), the income is taxed at the individual’s slab rate, not the flat 30%.
Specific Rules for NRIs
NRIs face the same 30% flat rate on VDA gains, but a few nuances matter:
- Section194S (Section 194S) is the TDS provision that requires a 1% tax deduction at source on crypto sales above the prescribed threshold. If a sale clears ₹50,000, the exchange must withhold 1% and remit it to the tax department.
- NRIs **cannot** claim the Section115F exemption, which lets residents defer long‑term capital gains by reinvesting in approved instruments. Section115F is a provision that offers tax relief when capital gains are ploughed into specific bonds, debentures, shares, or mutual fund units. Crypto is explicitly excluded from the eligible assets list.
- The flat 30% rate applies even if the NRI’s global income falls in a lower slab; there’s no progressive relief.
- Reporting is mandatory. NRIs must disclose VDA holdings and any gains in their Indian income‑tax return (ITR‑2 or ITR‑3, depending on other income sources).
What Exemptions Are Missing?
Traditional NRI investments enjoy several tax-friendly routes:
- Reinvestment of foreign‑exchange asset gains under Section115F.
- Capital‑gain indexation benefits on long‑term securities.
- Tax‑holiday bonds and sovereign gold bonds for tax‑free interest.
None of these translate to crypto. The tax code treats every VDA alike, so the only “benefit” an NRI can claim is the 1% TDS credit against the final tax liability - a modest relief compared with the 30% that sits on top of any gain.
Residency Rule Change in 2026 - Why It Matters
From April12026, the 120‑day rule will push more NRIs into Resident status if they earn over ₹15lakhs in India. Once that happens, the 30% flat rate still applies, but now **global** crypto holdings become taxable. That could massively increase the tax bill for NRIs who hold large positions on foreign exchanges.
Scenario example:
- An Indian tech professional works abroad, returns to India for 130days a year, and earns ₹20lakhs from a consulting contract.
- Under the new rule, they become a Resident.
- All crypto gains - even those earned on a US‑based exchange - now fall under the 30% tax, plus the 1% TDS if the transaction is routed through an Indian exchange.
Planning ahead means either limiting days in India, keeping Indian‑source crypto activity low, or restructuring the portfolio to use jurisdictions with favorable tax treaties.
Practical Compliance Checklist for NRIs
- Record every transaction: date, token, quantity, value in INR, exchange used, and fees (even though fees aren’t deductible, they’re needed for audit trails).
- Identify the source: note whether the trade happened on an Indian exchange (e.g., WazirX, CoinDCX) or abroad.
- File ITR on time: use ITR‑2 if you have only capital‑gain income, ITR‑3 if you also have business income.
- Claim TDS credit: the Form‑26AS will show the 1% TDS deducted; make sure it matches the exchange statements.
- Watch residency days: maintain a travel log if you’re close to the 120‑day threshold.
- Consider professional advice: a chartered accountant familiar with cross‑border crypto can help you avoid penalties.
Crypto Tax Comparison: Resident vs. NRI
| Aspect | Resident (Indian) | Non‑Resident Indian (NRI) |
|---|---|---|
| Tax rate on VDA gains | 30% flat | 30% flat |
| TDS under Section194S | 1% on sales >₹50,000 | 1% on sales >₹50,000 (same) |
| Deductible expenses | Purchase cost only | Purchase cost only |
| Loss set‑off | Not allowed | Not allowed |
| Section115F exemption | Available for approved assets | Not applicable to crypto |
| Global vs. Indian‑source scope | Global income taxed | Only Indian‑source crypto taxed (unless residency changes) |
Next Steps & Common Pitfalls
Don’t assume a crypto‑exchange automatically handles your tax. Most Indian platforms only deduct the 1% TDS; the remaining 29% is your responsibility.
Watch out for these traps:
- Mixing personal and business wallets - the tax authority treats them the same, but poor separation makes proof of purchase cost harder.
- Ignoring airdrop income - even if you didn’t pay for the token, its fair market value at receipt is taxable at your slab rate.
- Assuming foreign exchanges are safe from Indian tax - residency change can pull those gains back in.
Action plan:
- Map your residency status for the current FY.
- Catalog every VDA transaction with INR equivalents.
- Calculate the 30% tax liability and cross‑check the TDS credit.
- File ITR before the July31 deadline, attaching a statement of crypto holdings.
- Set up a reminder for the new 120‑day rule starting FY2026‑27.
Frequently Asked Questions
Do NRIs pay tax on crypto bought on foreign exchanges?
Only if the NRI is classified as a Resident (or RNOR with Indian‑source income). For a pure Non‑Resident, tax applies only to transactions that happen on Indian exchanges or are deemed Indian‑source.
Can I offset crypto losses against other income?
No. The law blocks loss set‑off for virtual digital assets. Each crypto gain is taxed independently at 30%.
What is the impact of Section194S for NRIs?
If a sale on an Indian exchange exceeds ₹50,000, the exchange deducts 1% TDS and issues a Form‑26AS entry. This credit reduces your final tax bill, but you still owe the remaining 29%.
Is there any way to defer crypto tax for NRIs?
Currently, no specific deferral scheme exists for crypto. Section115F deferral applies only to approved traditional assets, not to virtual digital assets.
Will the 2026 residency rule affect my existing crypto portfolio?
If you cross the 120‑day threshold and earn over ₹15lakhs, you become a Resident, and all worldwide crypto gains will be taxed at the flat 30% from that FY onward.
Thiago Rafael
September 28, 2025 AT 10:54To put it bluntly, the flat 30% rate applies regardless of whether the gain is short‑term or long‑term, which eliminates any speculation about preferential treatment. Moreover, Section 194S enforces a 1% TDS on sales exceeding ₹50,000, and that deduction is merely a credit against the final liability. NRIs cannot invoke Section 115F for crypto, so there is no deferral mechanism whatsoever. The practical upshot is that you must calculate the gross gain, apply the 30% tax, and then subtract the TDS credit. Ignoring any of these steps will almost certainly result in a penalty.
Krystine Kruchten
September 29, 2025 AT 09:55Hey folks, just wanted to add that keeping a detailed spreadsheet can save you a lot of headaches later on. Even if you think your trades are few, the tax department likes to see every INR‑converted value. Stick to it and you'll breathe easier at filing time.
Mangal Chauhan
September 30, 2025 AT 08:55Here’s a quick checklist to keep you on track 😊
• Record date, token, quantity, INR value, and exchange for every trade.
• Flag whether the exchange is Indian or foreign.
• Compute 30% on gains, then apply the 1% TDS credit if applicable.
• File ITR‑2 or ITR‑3 with a crypto holdings statement.
• Monitor your days in India to avoid the 120‑day residency trap.
Stay organized and the process becomes painless.
Iva Djukić
October 1, 2025 AT 07:56From a jurisprudential perspective, the codification of Virtual Digital Assets (VDA) under the Income Tax Act represents a paradigmatic shift in fiscal policy, crystallizing the government's resolve to treat crypto as a distinct asset class with a monolithic tax rate. The statutory provision of a flat thirty percent levy eschews the conventional bifurcation into short‑term and long‑term capital gains, thereby simplifying the computational substrate but concomitantly imposing a uniform fiscal burden irrespective of holding period. This legislative architecture deliberately precludes the application of Section 115F, a mechanism traditionally reserved for capital reinvestment in approved securities, thereby extinguishing any prospect of tax deferral for crypto disposals. Consequently, the tax liability is computed by first determining the gross capital gain, defined as the difference between the sale proceeds and the acquisition cost, with the latter being the sole deductible expense; ancillary outlays such as transaction fees, gas costs, and custodial charges are expressly excluded from the deduction matrix. The resultant taxable base is then multiplied by the statutory thirty percent rate, yielding the gross tax due. Parallelly, Section 194S mandates a one percent Tax Deducted at Source (TDS) on any sale transacted on an Indian exchange exceeding the threshold of ₹50,000, a credit that is subsequently reconciled against the gross tax liability in the final return. It is imperative to underscore that losses incurred on VDA transactions are non‑deductible and cannot be set‑off against other income streams, a provision that further amplifies the fiscal exposure of investors. Moreover, acquisitions devoid of consideration-such as airdrops, mining rewards, or gifts-are taxed at the individual’s marginal income tax slab, thereby introducing a variable tax rate component that coexists with the flat capital gains regime. The residency nexus plays a pivotal role: while Non‑Resident Indians (NRIs) are taxed solely on Indian‑source crypto gains, the impending amendment to the residency criteria, slated for April 2026, will lower the threshold to 120 days and impose an income ceiling of ₹15 lakhs, potentially reclassifying a substantial cohort of NRIs as Residents. Upon such reclassification, the territorial tax principle expands to encompass global crypto holdings, subjecting overseas exchange gains to the same thirty percent regime. Practically, this necessitates a rigorous demarcation of exchange jurisdiction for each transaction, meticulous record‑keeping in INR equivalents, and proactive monitoring of physical presence in India to avert inadvertent residency conversion. In sum, the legislative framework seeks to eliminate ambiguity by imposing a uniform tax rate, but the interplay of residency status, source of income, and ancillary provisions such as TDS and loss non‑set‑off engenders a complex compliance landscape that demands meticulous documentation and strategic tax planning.
WILMAR MURIEL
October 2, 2025 AT 06:56When you look at the practical side of compliance, the first step is to set up a reliable ledger-whether a spreadsheet or a dedicated crypto accounting tool. Capture every ledger entry: date, token name, quantity, INR conversion rate, and the exchange platform. Distinguish between Indian and foreign exchanges, because the source rule hinges on that classification. After you aggregate the gross gains, apply the thirty percent statutory rate, then subtract any TDS credit reflected in your Form‑26AS. Finally, file the appropriate ITR form-ITR‑2 if you only have capital gains or ITR‑3 if you also have business income. Consistent record‑keeping will make the process far less painful.
Lisa Strauss
October 3, 2025 AT 05:57Great breakdown, thanks!
Darrin Budzak
October 4, 2025 AT 04:57I’m just here to say the crypto tax rules are clearer than my coffee order. Keep those records tidy.
Andrew McDonald
October 5, 2025 AT 03:58Interesting take, though I think the practical impact is overstated. :)