Crypto tax in India for spot trades, a practical guide to PnL, FIFO, and clean records

If your exchange shows “Profit”, it doesn’t mean your crypto tax India numbers are ready. Tax works on what you sold, what it cost you (in INR terms), what TDS got cut, and whether your records can survive one boring question from the tax department. Spot trading looks simple on screen, buy coin, sell coin, done. In real life, you buy in parts, sell in parts, swap to USDT, move coins to a wallet, pay fees in three places, and then FY ends. This guide keeps it practical: 30% VDA tax basics, FIFO matching, how to treat fees, 1% TDS, and a record system that stays clean. What “taxable” means for spot crypto trades (VDA) An AI-created infographic showing FIFO lot matching, a simple PnL worksheet, and a clean-records checklist. For India, most retail spot activity sits under VDA rules (Section 115BBH for tax on income, Section 194S for TDS). A quick mental model helps: tax triggers when you “transfer” a VDA, not when you just move it around for yourself. Common taxable events in spot trading: Selling crypto to INR (BTC to INR, ETH to INR). Swapping one crypto to another (BTC to ETH). Swapping stablecoin to crypto (USDT to SOL), this is still VDA to VDA. Paying for something using crypto (yes, still a transfer). Common non-taxable events (but track them properly): Moving coins between your own wallets or exchanges (self-transfer). Converting INR to crypto (buy only, no transfer out yet). For a plain-language reference of the same rules and sections, you can cross-check with the IndiaFilings crypto tax overview and keep it bookmarked for later. The core tax rules you must not miss (FY 2025-26, AY 2026-27) 30% tax on VDA gains (flat rate) Profits on VDAs are taxed at 30% under Section 115BBH, then applicable surcharge and cess apply (depending on your case). Holding period doesn’t rescue you here, one day or one year, the 30% rule stays. A simple profit formula (per sell or transfer): Taxable gain = Sale value (in INR) minus Cost of acquisition (in INR) That’s why your cost basis tracking becomes the whole game. For another plain explanation, the ClearTax cryptocurrency taxation guide is a decent starting point, then you come back to your own numbers. Loss set-off and carry-forward is restricted This part hurts, so say it clearly: VDA losses generally can’t be set off against other income, and even against other VDA gains (as the rule is applied in practice). Carry-forward is also not allowed in the usual way. So if you made INR 2,00,000 profit on one coin, and lost INR 1,50,000 on another, you still can end up paying tax on the profit side. So your “net portfolio is down” feeling doesn’t automatically become “tax is zero”. Keep that expectation correct early. 1% TDS on every sell, and why it breaks your cashflow Under Section 194S, 1% TDS applies on consideration when you sell or transfer VDA (subject to thresholds and whether you are a specified person). On exchanges, it usually gets deducted automatically on each sell trade. Two practical points: TDS is not extra tax by itself, it’s a pre-paid tax credit, you later adjust it in your ITR. TDS is usually on gross trade value, not on profit. So even a loss trade can have TDS cut. Keep your TDS entries aligned with Form 26AS / AIS. If your reporting gets messy, you start seeing mismatch notices. This Mint explainer on Schedule VDA reporting gives a realistic view of why scrip-wise data matters. FIFO PnL for spot trades (a worked example with fees) The Income Tax Act doesn’t hand you a “must use FIFO” line for VDAs. Still, FIFO is the easiest to defend because it’s consistent and it matches the basic inventory queue idea (first coin in, first coin out). Pick a method, document it, don’t change it mid-year. Below is a FIFO example with multiple buys, partial sells, and fees. Assumption: exchange fee is charged in INR. For simplicity, buy fees are added to cost (capitalised), sell fees reduce the net INR you actually receive (keep both gross and net in records, because TDS is often on gross). Trade history (BTC, FY 2025-26) 10 Apr 2025: Buy 0.40 BTC at ₹50,00,000/BTC, trade value ₹20,00,000, buy fee ₹2,000 25 May 2025: Buy 0.35 BTC at ₹55,00,000/BTC, trade value ₹19,25,000, buy fee ₹1,925 10 Jun 2025: Buy 0.25 BTC at ₹52,00,000/BTC, trade value ₹13,00,000, buy fee ₹1,300 Now two sells happen. FIFO matching and PnL table Sell date Sell qty (BTC) FIFO lots used Gross sale (₹) Sell fee (₹) Net sale (₹) Cost matched incl buy fees (₹) Net PnL (₹) TDS (1% of gross) (₹) 15 Aug 2025 0.60 0.40 from 10 Apr, 0.20 from 25 May 36,00,000 3,600 35,96,400 31,03,100 4,93,300 36,000 20 Sep 2025 0.30 0.15 from 25 May, 0.15 from 10 Jun 17,40,000 1,740 17,38,260 16,06,605 1,31,655 17,400 How the first sell cost was computed (key steps, no drama): Lot 1 cost: ₹20,00,000 + ₹2,000 fee = ₹20,02,000 for 0.40 BTC Lot 2 per-BTC cost is ₹55,00,000; for 0.20 BTC cost = ₹11,00,000 Lot 2 fee allocation: ₹1,925 × (0.20/0.35) = ₹1,100 (rounded) Total matched cost = ₹20,02,000 + ₹11,01,100 = ₹31,03,100 If you do this across multiple exchanges and self-custody wallets, apply FIFO per asset across your whole holding, not exchange-wise, or you will end up with two different “first coins” at the same time. Also, keep a note: fee treatment can be debated under strict reading of “only cost of acquisition allowed”. For edge cases, lock a consistent approach with a tax professional, and keep the gross and net numbers available. Stablecoin-to-crypto trades and wallet transfers (don’t mix them up) USDT to crypto spot trade If you swap USDT to BTC, you are “transferring” USDT and “acquiring” BTC. That means: You calculate gain or loss on the USDT leg (in INR value at that time). Your BTC cost basis becomes the INR value of USDT given up (plus related fees, if you capitalise them). Many people skip this because stablecoin feels like cash. Tax doesn’t see it as cash, it sees it as VDA. If you need a broader, tool-style overview of how swaps are treated, the Koinly India crypto tax guide is helpful for sanity checks, even if you still keep your own spreadsheet clean. Wallet transfer (self-transfer) Moving BTC from Exchange A to your own wallet is not a taxable transfer by itself. Still, it’s where cost basis gets destroyed if you don’t track: The withdrawal date and time Quantity received (after network fee) Network or withdrawal fee (often charged in crypto) Destination wallet address (at least the first and last characters) Network fee is annoying because it reduces your holdings. Practically, treat it as a fee paid, record it, and don’t pretend your inventory quantity stayed the same. Clean records for Schedule VDA (copy-paste checklist) If you want a CA-style answer: good tax filing is boring record hygiene repeated every month. “Downloadable-style” checklist Full trade history CSV from each exchange (spot only, no missing dates) Separate report for TDS deducted (date, amount, order ID) Deposit and withdrawal history (including on-chain tx hash) Fee ledger (trade fees, withdrawal fees, conversion fees) INR conversion source for non-INR pairs (timestamp, rate used) Wallet transfer tagging (Self-transfer, not a sale) Backups: one cloud folder, one offline copy (PDF and CSV) Recommended CSV columns (minimum) Date-time (IST), Exchange, Asset, Pair, Side (Buy/Sell), Qty, Price, Gross value (INR), Fee amount, Fee currency, Net value (INR), Order ID, Tx hash (if any), Wallet from/to, TDS amount, TDS ref (if any), Notes (FIFO lot tag). If your exchange exports messy files, clean them once, then reuse the template. Conclusion Crypto tax work feels like counting grains of rice, until you realise each grain is INR. For crypto tax India, the practical routine is simple: treat each sell or swap as a taxable event, match lots with FIFO consistently, reconcile 1% TDS, and keep records that don’t break under questions. Rules can change, and interpretation on fees and swaps can vary by facts. For complex cases (high volume, P2P, in-kind consideration, multiple wallets, or past missing history), consult a tax professional and lock your method before filing.