Tokenized Stocks in India: Why the Same NVIDIA Share Is Taxed at 30% or 12.5% Depending on How You Buy It

You can now buy a share of NVIDIA two very different ways. You can remit dollars abroad under the Liberalised Remittance Scheme and buy NVDA through a broker. Or you can buy a tokenized wrapper — an onchain token like Ondo Global Markets' NVDAon or Backed Finance's NVDAx that tracks the same share.

Same company. Same economic exposure. Same price movement, near enough.

Wildly different tax bills.

Almost nobody tells you this, and the reason is structural: the platform selling you the token only sees its own side of the trade. Your broker only sees theirs. Neither one is in a position to compare — and neither has any incentive to.

The Two Routes, Side by Side

For an Indian resident, here is how the same exposure is treated.

Route 1: The tokenized wrapper — 30%, flat

A tokenized stock is treated as a Virtual Digital Asset (VDA). That puts it under Section 115BBH, and the terms are severe:

• 30% flat tax, plus 4% cess. Your income slab is irrelevant. How long you held it is irrelevant. Held it three years? Still 30%.
• Only the cost of acquisition is deductible. Brokerage, transaction fees, platform charges — none of it reduces your taxable gain.
• 1% TDS on transfer under Section 194S once your annual transfers cross the threshold. It is adjustable against your final liability, but it is deducted as you go.
• Losses relieve nothing. This is the part that surprises people. A loss on a VDA cannot be set off against your salary, your capital gains, or even against a gain on another VDA. And it cannot be carried forward. If you make ₹1 lakh on one token and lose ₹1 lakh on another in the same year, you are taxed on the full ₹1 lakh gain and the loss simply evaporates.

Route 2: The direct share via LRS — 12.5% long-term

Buy the actual foreign share and it is an ordinary capital asset:

• 12.5% on long-term gains — holdings beyond 24 months, without indexation.
• Slab rate on short-term gains — holdings of 24 months or less.
• 20% TCS above ₹10 lakh of total yearly LRS remittances. This is collected at source and is adjustable against your tax liability, so it is a cash-flow cost rather than a permanent one.
• USD 250,000 annual cap on remittances under LRS.
• DTAA relief is available against tax already paid abroad.
• Losses behave normally — they can be set off and carried forward under the ordinary rules.

What This Means in Practice

Consider a long-term holder who buys ₹10 lakh of NVIDIA exposure and sells three years later at ₹18 lakh — a ₹8 lakh gain.

• Direct share (long-term): 12.5% of ₹8 lakh = ₹1,00,000.
• Tokenized wrapper: 30% of ₹8 lakh = ₹2,40,000, plus cess.

That is roughly 2.4 times the tax on an identical outcome, purely because of the wrapper. And if that investor also lost money on a different token that year, the direct route would have let them offset it. The tokenized route would not.

Illustrative figures, and your own position depends on your residency, holding period and total income — but the direction of the gap is not marginal.

So Why Would Anyone Buy the Token?

There are honest reasons, and they are worth stating plainly:

• Access. No LRS paperwork, no remittance, no overseas brokerage account.
• Settlement. Onchain settlement is near-instant and runs outside market hours.
• Fractional size. Meaningful exposure at very small ticket sizes.
• Composability. The token can be used as collateral in ways a brokerage share cannot.

Those are real advantages. The point is not that tokenized stocks are bad — it is that they are a convenience choice, not a tax-efficiency choice, and they are frequently marketed as though they were both.

A Second Thing Nobody Mentions: The Token Is Not the Share

A tokenized wrapper carries its underlying's ISIN, which makes it easy to assume the two are interchangeable. They are not, and the market prices that difference.

Checking live prices while writing this: AAPLon traded at $310.76 while AAPL itself was at $313.33 — a discount of roughly 0.8%. Not dramatic, but real, and it moves. You are holding a claim on the share, subject to the issuer's solvency and the redemption mechanism working. That is genuine counterparty risk sitting between you and the company.

Which is why, if you hold both, they deserve to be tracked as two separate positions — different custody, different settlement, different tax treatment, different cost basis. Collapsing them into one line hides all four.

How to Track This Properly

If you hold tokenized equities, your tracking needs to answer three questions that most tools cannot:

1. Do I own this company twice? Once through a broker and once onchain is a real position size you may not have intended.
2. What is my actual tax exposure? Not blended — split by wrapper, because the two halves are taxed under entirely different sections.
3. What is the token trading at, not the underlying? Valuing your wrapper at the underlying's price quietly overstates your holding.

Agni Folio tracks tokenized equities as a first-class asset type, priced from the token itself rather than the underlying share, and kept deliberately separate from the same security held through a broker — so both show up, and the pairing is visible rather than silently merged.

You can also ask about it directly through our AI assistant, or connect Agni Folio to your own AI via MCP and ask there: "what tokenized assets do I hold, and how are they taxed compared to buying directly?"

The Short Version

• Tokenized stock in India = VDA = 30% flat, no expense deduction, no loss relief at all.
• Direct foreign share via LRS = 12.5% long-term, slab short-term, TCS adjustable, normal loss set-off.
• The token can trade at a discount to the share it tracks.
• If you hold both, track both — separately.

The tokenized route buys you access and speed. It is worth knowing what it costs.

This is an informational summary of published statutory rates, not tax advice. Your position depends on your residency, holding period and total income. Confirm with a qualified professional before acting.

Track tokenized equities alongside everything else you own — get started with Agni Folio.