The 1% TDS on crypto means that when you sell, swap or otherwise transfer Bitcoin or another virtual digital asset, the person paying you deducts 1% of the payment and deposits it with the government against your PAN. It comes from section 194S of the Income-tax Act, 1961 (now section 393 under the Income-tax Act, 2025). It is charged on the sale value, not the profit, and it is not an extra tax: it shows up in your Form 26AS and AIS, and you claim it when you file your return.
There are small thresholds. No TDS applies if the total paid to you in a financial year stays within ₹50,000 where the payer is a "specified person", or ₹10,000 for any other payer. If you have not given your PAN, the rate can be 20%. If your total TDS ends up more than the tax you owe, the excess is refunded. Here is how each piece works.
Treat TDS as a credit you claim, not a fee you lose
I co-founded Unocoin in 2013. When TDS came in through the Finance Act 2022, it is easy to look at that 1% leaving every sale and think of it as a new fee.
I see it differently. TDS is the reason every serious Indian platform reports your trades to the tax department, and it is money that is still yours. You just collect it at ITR time. The people who lose it are the ones who forget to claim it. Never try to dodge it: avoiding TDS is not a saving, it is a problem waiting for you at assessment time.
What the 1% TDS is
Section 194S says that anyone paying a resident for the transfer of a virtual digital asset must deduct 1% of the consideration as tax at source. Bitcoin is a VDA, so this applies every time you sell it.
Two things follow from that wording.
First, it is 1% of the consideration, meaning the sale value. Sell ₹1,00,000 worth of Bitcoin and ₹1,000 is deducted. It does not matter whether you made a ₹40,000 profit or a ₹30,000 loss on that sale.
Second, it is tax at source, not tax on top. The main tax on crypto is the flat 30% on gains under section 115BBH, plus cess. TDS is an advance payment toward your total tax for the year.
If you are paid in kind or in another crypto rather than in rupees, the payer still has to make sure the tax is paid before handing it over.
Thresholds and the "specified person" rule
There is no TDS if the total consideration in a financial year does not exceed:
- ₹50,000, where the payer is a specified person
- ₹10,000, for any other payer
A "specified person" is an individual or HUF whose business turnover was up to ₹1 crore, or professional receipts up to ₹50 lakh, in the previous year, or who has no business or professional income at all.
A word of caution. Some websites flip these two numbers. The version above is the one in the law as summarised by Taxguru and carried into the new Act. And being under the TDS threshold has nothing to do with whether you owe tax. If you made a gain, the 30% applies regardless of whether any TDS was deducted.
Who deducts: platform or buyer
The law puts the duty on the person paying for the VDA, which is the buyer. In practice, when you sell on an Indian platform, the platform deducts it as part of the trade, and it shows up on your statement.
If you sell directly to another person, outside a platform, the buyer is responsible for deducting and depositing the TDS. This is one reason I steer people to use a platform registered with FIU-IND. A stranger buying your Bitcoin is unlikely to handle TDS correctly, and you are left with gaps in your records.
And if you have not given your PAN, the rate can be 20% instead of 1%. Every proper Indian platform will ask for your PAN at KYC. Give it there, inside the app or website only, and never to anyone in a chat or call.
Section 194S is now section 393
The Income-tax Act, 2025 came into force on 1 April 2026. Under the new Act, the TDS on VDA transfers sits in section 393(1), Table Sl. No. 8(vi). The rate is still 1%. The ₹10,000 and ₹50,000 thresholds carry over. The 20% rate where PAN is not furnished applies.
So for sales from April 2026 onward you will see the new numbering on some forms and certificates, and the old 194S number on older statements. The rules are carried over in substance, but check the current numbering with your CA when you file.
Seeing TDS in 26AS and AIS
Once TDS is deducted and deposited, it appears against your PAN on the income tax portal, in two places:
- Form 26AS, the statement of tax deducted and deposited on your behalf
- Your Annual Information Statement (AIS), which also shows other financial information reported about you
Check both a few times a year, not just at filing time. Match the entries with your platform statements. If a sale is missing, or the amount looks wrong, raise it with the platform's support through official channels while the records are fresh.
Claiming it in your ITR
When you file, crypto sales go into Schedule VDA, which sits in ITR-2 or ITR-3. ITR-1 cannot be used with VDA income.
Then enter the TDS in the tax-paid section of the return so it is credited against your tax. A worked example, with made-up numbers:
- You sold Bitcoin for ₹1,40,000 that cost you ₹1,00,000. Gain ₹40,000.
- Tax at 30% is ₹12,000, plus 4% cess of ₹480, total ₹12,480.
- TDS deducted: 1% of ₹1,40,000 = ₹1,400.
- Left to pay: ₹11,080.
Now a loss case. You sold for ₹70,000 something that cost ₹1,00,000. No tax on that sale, but ₹700 of TDS was deducted. It still counts. It is added to all the other tax paid on your behalf that year, and if the total is more than your tax, the excess is refunded after processing.
The Schedule VDA guide shows where each number goes.
What TDS means if you trade often
Because TDS is charged on the sale value, it adds up fast for anyone who trades in and out. Take a made-up case: you sell ₹1,00,000 worth of Bitcoin ten times in a year, buying back in between. That is ₹10,000 of TDS deducted, even if your trades roughly broke even. You can claim it back against your tax, and get any excess refunded, but only after you file and the return is processed. Until then, that money is sitting with the government, not working for you.
Combine that with the rule that VDA losses cannot be set off, and frequent trading in India carries real friction. This is one reason I talk about slow, regular buying and holding rather than jumping in and out. It is not a prediction about price. It is just arithmetic.
Common TDS mistakes
- Forgetting to claim TDS in the return, which means paying it twice
- Thinking TDS is the whole tax and not paying the 30% on gains
- Assuming no TDS means no tax
- Selling to strangers outside a platform and ending up with no TDS records
- Not checking 26AS and AIS until the week of the deadline
Our full TDS guide keeps the rules up to date as they change. Read it before your next sale, and check your own situation with a CA.
Common questions
What does 1% TDS on crypto mean?
When you transfer a virtual digital asset such as Bitcoin, the payer deducts 1% of the sale value and deposits it against your PAN under section 194S (now section 393 under the Income-tax Act, 2025). You claim it as tax paid in your ITR.
Is TDS deducted on buying or selling crypto?
TDS is deducted on the payment made to the person transferring the VDA, so it hits you when you sell or swap. The buyer, or the platform on the buyer's behalf, deducts it.
Is TDS on crypto refundable?
TDS is credited against your total tax for the year. If it is more than what you owe, the excess is refunded after you file and the return is processed. You must claim it in the tax-paid section.
Is there TDS below Rs 10,000?
No TDS applies if the total consideration in a financial year stays within ₹10,000 for most payers, or ₹50,000 where the payer is a specified person. Tax on any gain still applies.