Section 115BBH applies to any assessee whose total income includes income from the transfer of any virtual digital asset. Notwithstanding anything in any other provision of the Act, that income is taxed at thirty per cent. The rest of the total income is taxed as if it were the total income.
For this purpose the definition of "transfer" in s. 2(47) applies to a virtual digital asset whether or not it is a capital asset.
Operative consequences
No deduction for any expenditure (other than cost of acquisition, if any) or allowance, and no set-off of any loss, is allowed in computing the income.
A loss from transfer of a virtual digital asset cannot be set off against any other income.
Such a loss cannot be carried forward to succeeding assessment years.
Status
Section 115BBH is operative for AY 2026-27. The Finance Act, 2026 does not amend it.
The 2025 Act taxes the income at 30% under Table Sl. No. 4 of s. 194(1), with the same restrictions on deductions and losses.
The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject the 2025 Act provision is s. 194(1), Table Sl. No. 4.
Case Laws & Commentary
SECTION 115BBH — TAX ON INCOME FROM VIRTUAL DIGITAL ASSET
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
A. SECTION COMMENTARY
A.1 Structural position & legislative purpose
Section 115BBH prescribes a flat rate of thirty per cent on income from the transfer of any virtual digital asset (VDA) - the regime introduced for crypto-assets, non-fungible tokens and other digital assets defined in section 2(47A). Where the total income of an assessee includes any income from the transfer of a VDA, the tax is the aggregate of (i) thirty per cent on that income and (ii) tax on the balance income at normal rates. The computation is sharply restrictive: no deduction in respect of any expenditure (other than the cost of acquisition) or allowance is allowed in computing the income; no set-off of any loss is permitted against the VDA income; and a loss from the transfer of a VDA cannot be set off against any other income nor carried forward to a subsequent year.
The charge is paired with a transaction-reporting and collection mechanism: section 194S requires tax to be deducted at one per cent on the consideration for the transfer of a VDA above the prescribed threshold, and the gift of a VDA is brought to charge under section 56(2)(x). The policy is to tax VDA gains at a high flat rate, deny loss relief and create an audit trail, reflecting the State's cautious stance towards the asset class.
A.2 Sub-section / clause taxonomy
Sub-section (1): the charge - 30% on income from the transfer of a VDA, plus tax on the balance income. Sub-section (2): in computing the VDA income, (a) no deduction of any expenditure (other than the cost of acquisition) or allowance is allowed, and (b) no set-off of loss is allowed. The accompanying scheme: section 2(47A) (definition of 'virtual digital asset'); section 194S (1% TDS on transfer); section 56(2)(x) (gift of a VDA); and the bar on set-off/carry-forward of VDA losses.
A.3 Core doctrinal themes
Theme (1) - Flat 30%, cost-only deduction: the only permitted deduction is the cost of acquisition; no other expense (e.g. infrastructure, electricity, financing) is allowable, and the rate is a flat 30% regardless of holding period.
Theme (2) - Loss ring-fencing: a VDA loss cannot be set off against VDA gains of other VDAs (as originally administered), against any other income, nor carried forward - the most stringent loss-isolation in the Act.
Theme (3) - Definition and collection architecture: section 2(47A) defines the asset class widely, section 194S creates a 1% TDS audit trail, and section 56(2)(x) catches gifts - together forming a self-contained VDA tax code.
Inserted by the Finance Act, 2022 with effect from assessment year 2023-24, together with section 2(47A) (VDA definition), section 194S (1% TDS) and the section 56(2)(x) gift charge. It is the first dedicated code for the taxation of digital assets in India.
Finance Act 2026: no amendment to section 115BBH. The 30% flat charge, the cost-only deduction, and the loss set-off/carry-forward bar continue for AY 2026-27 onward.
A.5 CA practitioner pointers
(1) Tax VDA transfer income at a flat 30%, allowing only the cost of acquisition - no other expense, and no basic-exemption cushion or Chapter VI-A relief. (2) Do not set off VDA losses against VDA gains or any other income, and do not carry them forward. (3) Ensure section 194S (1% TDS) compliance on transfers above the threshold, including peer-to-peer and exchange transactions. (4) Treat the gift of a VDA as taxable under section 56(2)(x) in the recipient's hands. (5) Maintain meticulous transaction records, since the regime denies most deductions and relies on the cost of acquisition.
B. FINANCE ACT, 2026 - IMPACT NOTE
Section 115BBH is NOT amended by the Finance Act, 2026. The 30% flat charge on income from the transfer of virtual digital assets, the cost-only deduction rule and the loss set-off/carry-forward prohibition continue for AY 2026-27 onward, alongside the section 194S TDS and the section 56(2)(x) gift charge.
C. CASE LAW - CLUSTERED BY ISSUE
Candid note on the case-law field: Section 115BBH is very recent (operative from AY 2023-24) and a body of binding appellate authority is only beginning to emerge; early Tribunal activity has touched on points such as the characterisation/holding-period of pre-regime crypto gains and the treatment of losses, but no settled landmark yet governs the section. Consistent with the accuracy discipline of this treatise, no case is cited as a controlling authority where none yet exists; the analysis is anchored in the statutory text (sections 115BBH, 2(47A), 194S, 56(2)(x)). The position is stated candidly rather than supported by premature or off-point citations.
D. PRACTITIONER'S NOTE
Section 115BBH is a deliberately austere code: flat 30%, cost-only deduction, and a total bar on loss relief and carry-forward. The practical work is record-keeping (cost of acquisition, transaction trails), section 194S TDS compliance, and the section 56(2)(x) gift charge. For pre-regime acquisitions and transfers straddling 1 April 2022, take care with the year of transfer and the characterisation of the gain, as the dedicated jurisprudence is still developing.
E. SOURCES & CITATIONS
Section 115BBH is not amended by the Finance Act, 2026.
Caveat: Treatise-style commentary for practitioners and academic use; not legal opinion. The VDA regime is new and its jurisprudence is developing; verify the current statutory text, the section 194S threshold/Rules and the latest CBDT/appellate position before relying on any proposition.
Function in the statutory architecture
Section 115BBH applies to any assessee whose total income includes income from the transfer of any virtual digital asset. Notwithstanding anything in any other provision of the Act, that income is taxed at thirty per cent. The rest of the total income is taxed as if it were the total income.
For this purpose the definition of "transfer" in s. 2(47) applies to a virtual digital asset whether or not it is a capital asset.
Operative consequences
Status
Section 115BBH is operative for AY 2026-27. The Finance Act, 2026 does not amend it.
The 2025 Act taxes the income at 30% under Table Sl. No. 4 of s. 194(1), with the same restrictions on deductions and losses.
The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject the 2025 Act provision is s. 194(1), Table Sl. No. 4.
Case Laws & Commentary
SECTION 115BBH — TAX ON INCOME FROM VIRTUAL DIGITAL ASSET
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
A. SECTION COMMENTARY
A.1 Structural position & legislative purpose
Section 115BBH prescribes a flat rate of thirty per cent on income from the transfer of any virtual digital asset (VDA) - the regime introduced for crypto-assets, non-fungible tokens and other digital assets defined in section 2(47A). Where the total income of an assessee includes any income from the transfer of a VDA, the tax is the aggregate of (i) thirty per cent on that income and (ii) tax on the balance income at normal rates. The computation is sharply restrictive: no deduction in respect of any expenditure (other than the cost of acquisition) or allowance is allowed in computing the income; no set-off of any loss is permitted against the VDA income; and a loss from the transfer of a VDA cannot be set off against any other income nor carried forward to a subsequent year.
The charge is paired with a transaction-reporting and collection mechanism: section 194S requires tax to be deducted at one per cent on the consideration for the transfer of a VDA above the prescribed threshold, and the gift of a VDA is brought to charge under section 56(2)(x). The policy is to tax VDA gains at a high flat rate, deny loss relief and create an audit trail, reflecting the State's cautious stance towards the asset class.
A.2 Sub-section / clause taxonomy
Sub-section (1): the charge - 30% on income from the transfer of a VDA, plus tax on the balance income. Sub-section (2): in computing the VDA income, (a) no deduction of any expenditure (other than the cost of acquisition) or allowance is allowed, and (b) no set-off of loss is allowed. The accompanying scheme: section 2(47A) (definition of 'virtual digital asset'); section 194S (1% TDS on transfer); section 56(2)(x) (gift of a VDA); and the bar on set-off/carry-forward of VDA losses.
A.3 Core doctrinal themes
Theme (1) - Flat 30%, cost-only deduction: the only permitted deduction is the cost of acquisition; no other expense (e.g. infrastructure, electricity, financing) is allowable, and the rate is a flat 30% regardless of holding period.
Theme (2) - Loss ring-fencing: a VDA loss cannot be set off against VDA gains of other VDAs (as originally administered), against any other income, nor carried forward - the most stringent loss-isolation in the Act.
Theme (3) - Definition and collection architecture: section 2(47A) defines the asset class widely, section 194S creates a 1% TDS audit trail, and section 56(2)(x) catches gifts - together forming a self-contained VDA tax code.
A.4 Legislative evolution / Finance Act amendment trail
Inserted by the Finance Act, 2022 with effect from assessment year 2023-24, together with section 2(47A) (VDA definition), section 194S (1% TDS) and the section 56(2)(x) gift charge. It is the first dedicated code for the taxation of digital assets in India.
Finance Act 2026: no amendment to section 115BBH. The 30% flat charge, the cost-only deduction, and the loss set-off/carry-forward bar continue for AY 2026-27 onward.
A.5 CA practitioner pointers
(1) Tax VDA transfer income at a flat 30%, allowing only the cost of acquisition - no other expense, and no basic-exemption cushion or Chapter VI-A relief. (2) Do not set off VDA losses against VDA gains or any other income, and do not carry them forward. (3) Ensure section 194S (1% TDS) compliance on transfers above the threshold, including peer-to-peer and exchange transactions. (4) Treat the gift of a VDA as taxable under section 56(2)(x) in the recipient's hands. (5) Maintain meticulous transaction records, since the regime denies most deductions and relies on the cost of acquisition.
B. FINANCE ACT, 2026 - IMPACT NOTE
Section 115BBH is NOT amended by the Finance Act, 2026. The 30% flat charge on income from the transfer of virtual digital assets, the cost-only deduction rule and the loss set-off/carry-forward prohibition continue for AY 2026-27 onward, alongside the section 194S TDS and the section 56(2)(x) gift charge.
C. CASE LAW - CLUSTERED BY ISSUE
Candid note on the case-law field: Section 115BBH is very recent (operative from AY 2023-24) and a body of binding appellate authority is only beginning to emerge; early Tribunal activity has touched on points such as the characterisation/holding-period of pre-regime crypto gains and the treatment of losses, but no settled landmark yet governs the section. Consistent with the accuracy discipline of this treatise, no case is cited as a controlling authority where none yet exists; the analysis is anchored in the statutory text (sections 115BBH, 2(47A), 194S, 56(2)(x)). The position is stated candidly rather than supported by premature or off-point citations.
D. PRACTITIONER'S NOTE
Section 115BBH is a deliberately austere code: flat 30%, cost-only deduction, and a total bar on loss relief and carry-forward. The practical work is record-keeping (cost of acquisition, transaction trails), section 194S TDS compliance, and the section 56(2)(x) gift charge. For pre-regime acquisitions and transfers straddling 1 April 2022, take care with the year of transfer and the characterisation of the gain, as the dedicated jurisprudence is still developing.
E. SOURCES & CITATIONS
Section 115BBH is not amended by the Finance Act, 2026.
Caveat: Treatise-style commentary for practitioners and academic use; not legal opinion. The VDA regime is new and its jurisprudence is developing; verify the current statutory text, the section 194S threshold/Rules and the latest CBDT/appellate position before relying on any proposition.