NRI Crypto Tax India 2026: How NRIs Should Report VDA Gains, TDS & Foreign Wallets

Fact-checked and reviewed by Kshitij Shah (BitNine), Chartered Accountant.

Living outside India does not automatically remove every Indian tax obligation connected with crypto. At the same time, an NRI is not taxed in India on global income in the same way as a resident and ordinarily resident taxpayer. The correct treatment depends first on residential status and then on whether the VDA income is received in India, accrues or arises in India, or is deemed to arise in India.

This distinction matters because two NRIs can execute similar crypto trades and still have different Indian filing obligations. One may sell through an Indian platform, receive taxable proceeds in India, and have TDS reflected in Form 26AS. Another may trade through a foreign platform, receive the proceeds outside India, and have no clear Indian-source connection. The exchange name or wallet location alone does not settle the tax result.

NRIs also face a different TDS issue from resident crypto sellers. Section 194S expressly covers consideration paid to a resident. Where the seller is a non-resident, section 195 may need to be examined instead if the payment is chargeable to tax in India. This guide explains how NRIs should determine whether VDA income belongs in an Indian return, report taxable gains through Schedule VDA, reconcile TDS, and handle foreign wallets for AY 2026–27.

Key takeaways

• Indian tax residential status must be determined separately for every financial year. Living abroad or holding an overseas visa does not, by itself, settle the tax classification.
• A non-resident is generally taxed in India only on income received or deemed received in India, or income that accrues, arises, or is deemed to accrue or arise in India.
• Where an NRI’s VDA income is taxable in India, section 115BBH generally taxes income from the transfer at 30%, plus applicable surcharge and cess.
• Section 194S applies to payments made to resident VDA sellers. Payments to an NRI may instead require examination under section 195 if the amount is chargeable to tax in India.
• Taxable VDA transfers are reported transaction-wise in Schedule VDA. ITR-2 generally applies where there is no business or professional income, while ITR-3 applies where the crypto activity is treated as a business.
• Non-residents and residents but not ordinarily resident are not required to complete Schedule FA merely because they hold crypto in foreign exchanges or wallets.

Why NRI status must be checked every year

“NRI” is often used casually to describe any Indian citizen living abroad. For income-tax purposes, however, residential status is determined under the statutory day-count and related rules for the relevant financial year. A person can be non-resident in one year and resident or resident but not ordinarily resident in another.

This must be checked before analysing the crypto transactions because residential status controls the scope of income taxable in India. A resident and ordinarily resident taxpayer is generally exposed to Indian tax on global income. A non-resident is generally taxed only on income received or deemed received in India and income that accrues, arises, or is deemed to accrue or arise in India.

The practical filing sequence should therefore begin with:

• determining residential status for FY 2025–26;
• identifying where each relevant VDA income item was received;
• reviewing whether the income has an Indian source or is deemed to arise in India; and
• checking whether a tax treaty affects India’s right to tax the income.

Treaty analysis should remain case-specific. A Double Taxation Avoidance Agreement may affect the final position, but the applicable article and relief depend on the NRI’s country of residence and the character of the income.

When an NRI’s crypto gains become taxable in India

The fact that an NRI owns crypto is not enough by itself to create Indian tax. India first needs a basis to include the related income within the non-resident’s taxable income.

The clearest statutory starting point is section 5. For a non-resident, the Indian tax base generally includes income received or deemed received in India and income that accrues, arises, or is deemed to accrue or arise in India. Applying that rule to crypto can be fact-sensitive because the law does not provide a simple VDA-specific rule that assigns every token or wallet to one country.

An Indian exchange, an Indian counterparty, settlement through an Indian payment route, or receipt of taxable consideration in India can create a stronger Indian reporting question. However, none of these facts should be used as a shortcut without examining the full transaction.

Holding funds in a foreign exchange or wallet doesn’t automatically qualify the gain as foreign-sourced. Similarly, using an Indian exchange does not replace the need to determine the correct source and receipt position. The platform and payment trail are relevant facts, but they are not the entire legal test.

Once VDA income is included in the NRI’s taxable income in India, section 115BBH generally applies in the same way it applies to other taxpayers. Income from the transfer is taxed at 30%, plus applicable surcharge and cess. Only the cost of acquisition is generally deductible, and losses from one VDA transfer cannot be set off against another income or carried forward.

Why TDS works differently for non-resident sellers

Section 194S is commonly associated with the 1% TDS on VDA transfers. However, its wording applies where consideration is paid to a resident. It should not be applied automatically to an NRI seller merely because the underlying asset is crypto.

Where a payment is made to a non-resident, section 195 becomes the more relevant provision if the sum is chargeable to tax in India. Section 195 requires the payer to deduct tax at the rates in force from a chargeable payment made to a non-resident. Unlike section 194S, it does not create one universal 1% rate for every NRI crypto sale.

This creates three practical points:

• the payer must first consider whether the payment is chargeable to tax in India;
• the applicable withholding rate may depend on the Act, surcharge, cess, and any available treaty position; and
• where only part of a payment is chargeable, the law provides a process for determining the appropriate taxable proportion.

An exchange or buyer may still deduct tax based on the information available in its records. The NRI should therefore check whether the platform has correctly captured the residential status and PAN rather than assuming that every crypto TDS entry is correct.

Where tax has been deducted, the seller should match it against:

• Form 26AS;
• AIS;
• the relevant TDS certificate or platform statement; and
• the corresponding sale reported in Schedule VDA.

If the deduction appears under the wrong section or at an incorrect rate, the deductor may need to correct the TDS return. The NRI should not simply alter the VDA income figure to force it to match the TDS amount. Withholding and final taxable income are related, but they are not the same calculation.

Choosing the correct ITR and completing Schedule VDA

For AY 2026–27, an NRI with Indian-taxable VDA income will generally need to choose between ITR-2 and ITR-3.

ITR-2 is generally appropriate where the individual does not have income from profits and gains of business or profession. This may fit an NRI whose taxable crypto transactions are being reported as capital gains.

ITR-3 is generally appropriate where the crypto activity is treated as a business or the individual has other business or professional income.

Both notified forms contain Schedule VDA. The schedule requires details of every taxable transfer rather than only one consolidated annual profit figure. The NRI should retain the transaction-level working even where the filing software imports or groups some data.

Assume, for example, that an NRI living in the UAE sells crypto in a transaction that is chargeable to tax in India. The sale consideration is ₹8 lakh, and the permitted cost of acquisition is ₹5 lakh. The NRI therefore has ₹3 lakh of taxable VDA income.

The reporting should generally reflect:

• ₹8 lakh as the relevant sale consideration;
• ₹5 lakh as the cost of acquisition;
• ₹3 lakh as the income from the transfer;
• the appropriate capital-gain or business classification;
• any tax deducted and reflected in Form 26AS; and
• the final section 115BBH tax computation.

If the activity is investment-oriented and the NRI has no business income, ITR-2 may be appropriate. If the trading pattern is treated as a business, ITR-3 would usually be the relevant form. The TDS amount should be claimed separately as tax already paid and should not be deducted from the sale consideration or gain.

An NRI may also need to file even where TDS has already been deducted. TDS is only advance collection of tax. It does not replace the return where filing is otherwise required, and a return may be necessary to claim excess TDS as a refund.

Whether foreign wallets belong in Schedule FA

Foreign-wallet reporting is one area where NRIs are often given resident-taxpayer advice by mistake.

The Income Tax Department’s current guidance states that Schedule FA need not be completed by a non-resident or a resident but not ordinarily resident. Therefore, an NRI does not ordinarily disclose Binance, Bybit, a foreign custodial account, or a self-custody wallet in Schedule FA merely because the asset is held outside India.

This does not mean the income can be ignored. Schedule FA is an asset-disclosure schedule, while Schedule VDA reports taxable transfers. If a transaction involving a foreign wallet produces income that is taxable in India, that transfer still needs to be reported even though the wallet itself is not entered in Schedule FA.

The distinction is:

• Foreign wallet holding: generally no Schedule FA disclosure for an NRI;
• Indian-taxable sale or swap from that wallet: report through the applicable income schedule and Schedule VDA;
• Change to resident and ordinarily resident status: review Schedule FA, FSI, and foreign-tax-credit requirements for that year.

A self-custody wallet also does not have a clear “location” in the same way as a foreign bank account. For NRI tax reporting, the more important questions are residential status, the source and receipt of income, and the facts surrounding the transfer.

Records NRIs should reconcile before filing

NRI crypto filings often become difficult because records are divided between Indian and foreign systems. The exchange statement may be in one currency, the wallet transfer in another, and the TDS entry may appear separately in India.

A practical filing file should include:

• complete trade history from Indian and foreign exchanges;
• wallet addresses and transaction hashes;
• dates of acquisition and transfer;
• sale consideration and cost of acquisition in Indian rupees;
• the exchange rate and valuation source used;
• Indian bank statements where proceeds were received in India;
• Form 26AS and AIS;
• TDS certificates or withholding statements;
• proof of foreign tax residence where treaty treatment is being considered; and
• a transaction-wise Schedule VDA working.

Internal wallet transfers must be separated from taxable sales or swaps. Moving crypto from an exchange to a self-custody wallet does not by itself create a transfer for sale, but a crypto-to-crypto exchange can still constitute a VDA transfer.

The NRI should also avoid importing the same transaction twice where both the exchange export and blockchain wallet history contain the movement. Duplicate entries can inflate sale consideration and create false gains.

Organising NRI crypto records with cryptact

NRI crypto reporting is rarely difficult because of one isolated trade. The difficulty comes from combining Indian exchange statements, foreign-platform records, wallet transfers, rupee valuations, and Indian TDS data into one coherent filing record.

cryptact helps bring exchange and wallet histories together so the taxpayer can separate internal transfers from taxable disposals, review acquisition costs, and organise transactions for Schedule VDA. It also makes it easier to compare the calculated transfer history with Form 26AS and AIS before filing.

For an NRI, this record structure is especially useful because the Indian return may cover only part of the person’s worldwide crypto activity. A clean transaction history helps identify which transfers require Indian reporting without incorrectly importing every foreign-wallet movement into the Indian tax computation.

Conclusion

NRI crypto tax in India begins with residential status and the scope of income taxable in India, not with the exchange name. A non-resident is generally taxed only on income received or deemed received in India and income that accrues, arises, or is deemed to arise in India. If a VDA gain enters the Indian tax base, section 115BBH, Schedule VDA, and the relevant ITR form then become important.

The TDS position must also be handled carefully. Section 194S applies to payments made to resident sellers, while a payment to an NRI may require review under section 195 if it is chargeable to tax in India. Foreign wallets do not ordinarily belong in Schedule FA for a non-resident, but any Indian-taxable transfer from those wallets still needs to be reported.

cryptact helps connect the records behind each of these steps. By bringing Indian and foreign exchange data, wallet activity, acquisition costs, and later disposals into one organised history, it becomes easier to prepare Schedule VDA accurately, reconcile TDS, and avoid reporting foreign activity that falls outside the Indian return.