If you buy or sell cryptocurrency in India, you may have noticed that 1% TDS (Tax Deducted at Source) is deducted from certain transactions. Many investors think this is an extra tax, but that’s not correct. The 1% TDS is a tax deduction under Section 194S of the Income-tax Act and is generally adjusted against your final tax liability when you file your Income Tax Return (ITR).
Here’s everything you need to know about TDS on crypto transactions in India.
What is TDS on Crypto?
TDS (Tax Deducted at Source) is a tax deducted at the time of transferring a Virtual Digital Asset (VDA) such as Bitcoin, Ethereum, or other cryptocurrencies.
The purpose of TDS is to help the Income Tax Department track crypto transactions and improve tax compliance.
Current TDS Rate on Crypto
Under the current tax rules:
| Particular | Details |
| TDS Rate | 1% |
| Applicable Law | Section 194S of the Income-tax Act |
| Applies To | Transfer of Virtual Digital Assets (VDAs) |
| Tax Credit | Can be claimed while filing ITR |
When is 1% TDS Deducted?
TDS may apply when:
- You sell cryptocurrency for Indian Rupees (INR).
- You exchange one cryptocurrency for another.
- You transfer crypto above the prescribed threshold.
- The transaction falls under the provisions of Section 194S.
In many cases, Indian crypto exchanges deduct the TDS automatically before completing the transaction.
Example of Crypto TDS
Suppose you sell Bitcoin worth ₹2,00,000.
| Details | Amount |
| Sale Value | ₹2,00,000 |
| TDS Rate | 1% |
| TDS Deducted | ₹2,000 |
| Amount Received | ₹1,98,000 |
The deducted ₹2,000 is deposited with the Income Tax Department and can generally be claimed as a tax credit while filing your ITR.
Is 1% TDS an Additional Tax?
No.
The 1% TDS is not an additional tax. It is an advance tax deduction that is adjusted against your final tax liability.
If your total tax payable is less than the TDS deducted, you may be eligible to claim a refund after filing your Income Tax Return.
How to Check Your Crypto TDS
You can verify the TDS deducted through:
- Form 26AS
- Annual Information Statement (AIS)
- Tax reports provided by your crypto exchange
Always ensure that the TDS shown in your tax records matches your exchange records.
How to Claim TDS Credit
To claim the credit:
- Verify the deducted TDS in Form 26AS or AIS.
- Report your crypto income correctly while filing your ITR.
- Claim the available TDS credit.
- Pay any remaining tax or claim a refund if excess TDS was deducted.
Common Mistakes to Avoid
- Assuming TDS is the final tax.
- Not reporting crypto income in your ITR.
- Forgetting to claim TDS credit.
- Ignoring Form 26AS or AIS before filing.
- Not maintaining transaction records.
FAQs
What is the TDS rate on crypto in India?
The current TDS rate on eligible crypto transactions is 1% under Section 194S of the Income-tax Act.
Does every crypto transaction attract TDS?
TDS applies only to transactions that meet the conditions and thresholds specified under the law.
Can I get a refund of crypto TDS?
Yes. If the total TDS deducted exceeds your final tax liability, you can generally claim the excess amount as a refund after filing your Income Tax Return.
Is TDS different from the 30% crypto tax?
Yes. The 30% tax applies to taxable crypto profits, while 1% TDS is a tax deduction made at the time of eligible transactions and is generally adjustable against your final tax liability.
Conclusion
The 1% TDS on crypto transactions is an important part of India’s crypto tax framework. It is deducted on eligible transfers of Virtual Digital Assets and helps the government track crypto transactions. Investors should regularly check their TDS records, report crypto income accurately in their ITR, and claim the available TDS credit to avoid paying more tax than required.