NFT Tax in India

Non-Fungible Token (NFT) tax in India is governed by the Virtual Digital Asset framework introduced by Finance Act 2022. NFTs are explicitly included in the VDA definition under §2(47A) of the Income Tax Act, 1961, and gains on transfer are taxed at 30% flat under §115BBH.

Definition

A Non-Fungible Token (NFT) is a unique digital token recorded on a blockchain that represents ownership of a distinct asset — typically a digital image, audio file, video, in-game item, or collectible. Unlike fungible tokens (where one BTC = any other BTC), each NFT has a unique identifier and is not interchangeable with any other token. NFTs are minted on smart-contract blockchains (predominantly Ethereum) and can be bought, sold, or transferred on NFT marketplaces.

Finance Act 2022 inserted NFTs into the §2(47A) VDA definition: "any token of a similar nature" to other VDAs. The Central Government may notify specific classes of NFTs (e.g., those representing physical assets with title documentation) as outside the VDA definition, but as of June 2026 no such carve-out notification has been issued for most consumer NFT categories.

Regulatory status in India

NFTs are regulated in India exclusively under income-tax law (§115BBH, §194S) and under the PMLA/FIU-IND framework for VASPs. They are not regulated as securities by SEBI (unless the NFT constitutes a security instrument in substance, which would require a separate SEBI analysis). RBI has no prudential oversight over NFTs.

A key regulatory distinction: NFTs that represent fractional ownership of real-world assets (real estate, fine art) may constitute collective investment schemes or securities under SEBI's jurisdiction regardless of the NFT technology layer. The legal substance, not the NFT wrapper, determines SEBI applicability. This is a complex legal question; individual assessment is required for structured NFT products.

NFT marketplace operators with Indian nexus may be required to register as VASPs under the March 2023 FIU-IND PMLA mandate if they facilitate VDA transfers.

Tax treatment

Two distinct tax streams apply to NFTs:

1. Gains on sale of NFT (§115BBH — Buyer / Investor / Trader):

• 30% flat tax on gain (sale proceeds minus cost of acquisition)
• No holding-period benefit; no set-off; no carry-forward of losses
• 1% TDS under §194S on sale consideration above threshold
• Cost basis: price paid in INR (or INR FMV of VDA given in exchange) at time of purchase

2. Royalty income (§28 / §56 — Creator / Artist):

• Royalties received by an NFT creator from secondary sales (smart-contract auto-royalties) are not VDA gain — they are professional income or income from other sources, taxable at the creator's applicable income-tax slab rate
• If the creator is a professional/freelancer, royalties are business income under §28; TDS applies at 10% under §194J
• Minting income: proceeds from the initial primary sale of an NFT by its creator is business/professional income, not VDA gain under §115BBH — this is distinct from selling an NFT one has purchased as an investor

Operational considerations

NFT transaction records must capture: blockchain network (Ethereum mainnet, Polygon, etc.), NFT contract address, token ID, transaction hash, date, and INR FMV of the consideration (either ETH/MATIC/other VDA paid, converted to INR at RBI reference rate on that date). Gas fees paid in ETH to mint or transfer NFTs may themselves constitute VDA transfers. Offshore NFT marketplaces (OpenSea, Blur, etc.) do not deduct Indian §194S TDS; self-deduction and Form 26QE filing is the taxpayer's responsibility.

Worked example

Scenario: Kavya (collector/investor) purchases an NFT for 0.5 ETH (₹1,10,000 at date of purchase) in July 2023. She sells it for 0.8 ETH (₹2,00,000 at date of sale) in January 2024 on an overseas marketplace.

Tax computation:

• Sale consideration: INR FMV of 0.8 ETH received = ₹2,00,000
• Cost of acquisition: INR FMV of 0.5 ETH paid = ₹1,10,000
• VDA gain (§115BBH): ₹2,00,000 − ₹1,10,000 = ₹90,000
• Tax @30% + 4% cess: ₹90,000 × 31.2% = ₹28,080
• TDS: overseas marketplace — no automatic deduction. Kavya must self-assess and deposit via Form 26QE
• Separately: the 0.8 ETH received is itself a VDA at cost ₹2,00,000; future sale of ETH triggers a fresh §115BBH computation

Note: This example uses illustrative figures. Consult a qualified tax professional for individual advice.

See also

• Virtual Digital Asset (VDA)
• Crypto Tax India (§115BBH)
• 1% TDS on Crypto (§194S)
• Ethereum in India
• Tax on Investments in India — Complete Guide

Primary source

Finance Act 2022, §2(47A) (VDA definition including NFTs), §115BBH: incometaxindia.gov.in — Income Tax Act. CBDT Circular No. 13/2022 (TDS on NFT transfers): CBDT Circular 13/2022.

MintByte is a SEBI-registered investment adviser (ARN-314872, APMI APRN-01658) offering services in mutual funds and NRI/GIFT City wealth management. MintByte does not advise on, recommend, or facilitate transactions in Virtual Digital Assets (VDAs) including cryptocurrencies. This content is factual and informational only, describing the legal and tax framework under Indian law. It is not investment advice. Past performance is not indicative of future returns. Read all scheme-related documents carefully.