What Is the 1% TDS on Crypto in India? A Plain-English Guide
The 1% TDS under Section 194S explained simply: when it applies, the ₹10,000 and ₹50,000 thresholds, why it is not an extra tax, and how to claim it back.
The 1% TDS on crypto is a tax deducted at source on the transfer of Virtual Digital Assets (VDAs) in India, introduced under Section 194S and effective from 1 July 2022. It applies to transactions above ₹10,000 in a year (₹50,000 for "specified persons"). Crucially, it is not an extra tax. It is a prepayment that gets adjusted against your final tax liability, and any excess is refundable. This plain-English guide explains exactly how it works.
TDS confuses a lot of Indian crypto users because it is charged on the transaction value, not just on profit, so you can see 1% shaved off even on a trade where you made no gain. Understanding why helps you plan better. As always, treat this as an educational overview and confirm the current thresholds and mechanics with a qualified CA or the Income Tax Department.
Key takeaways
- 1% TDS applies to VDA transfers under Section 194S, effective 1 July 2022.
- Threshold is ₹10,000 in a year; ₹50,000 for "specified persons".
- It is deducted on the transaction value, not on profit.
- It is not an additional tax; it is adjusted against your final tax and any excess is refunded.
- On FIU-registered Indian exchanges, the platform usually deducts and deposits it for you.
What TDS actually is
"Tax Deducted at Source" means a small slice of a payment is withheld by the payer and deposited with the government on your behalf, then credited to your PAN. You have met TDS before, on salary and on bank interest. For crypto, Section 194S extends the same idea to VDA transfers: when you sell or swap crypto, 1% of the transfer value is deducted and parked against your eventual tax bill.
The key phrase is "against your eventual tax bill". TDS is not a new charge on top of the 30% crypto tax. It is an advance instalment of it.
When does the 1% apply?
The deduction kicks in once your crypto transactions cross the annual threshold:
- ₹10,000 for most people.
- ₹50,000 for "specified persons": broadly individuals or Hindu Undivided Families whose income does not include business/professional receipts above the defined limits.
On Indian exchanges registered with FIU-IND, the exchange typically handles the deduction automatically at the time of the trade and deposits it, so you rarely have to compute it yourself. On peer-to-peer or off-exchange transfers, the responsibility to deduct can fall on the buyer. This is a common area to get wrong, so seek guidance.
Deducted on value, not profit: a worked example
This is the part that surprises people. The 1% is on the sale value, regardless of whether you profited.
| Transaction | Sale value (₹) | 1% TDS (₹) | You receive (₹) |
|---|---|---|---|
| Sell BTC at a profit | 1,00,000 | 1,000 | 99,000 |
| Sell ETH at a loss | 50,000 | 500 | 49,500 |
| Sell SOL at break-even | 20,000 | 200 | 19,800 |
Even the loss-making and break-even trades have 1% deducted, because TDS is tied to the transfer value, not the gain. That deducted amount is not lost; it is credited to you. Active traders feel this most, since the same rupees get taxed at source repeatedly as they cycle in and out; our guide to crypto trading vs investing explains why heavy churn magnifies this drag.
Why it is not an extra tax
At the end of the year, your actual crypto tax is the flat 30% on your net gains (with no loss set-off) under Section 115BBH. All the 1% TDS collected through the year is treated as tax already paid:
- If your 30% tax is more than the TDS collected, you pay the difference at filing.
- If the TDS collected is more than your 30% tax (common for high-volume, low-margin traders), you claim the excess back as a refund.
To see how the 30% and the TDS come together on a real return, read our crypto tax in India explainer and the step-by-step ITR walkthrough for crypto.
How to claim your TDS credit
The deducted TDS shows up in your Form 26AS and Annual Information Statement (AIS) against your PAN. When you file, you report your gains, compute the 30% tax, and claim the TDS as credit, which reduces what you owe or generates a refund. Reconcile the TDS in your AIS with your exchange statements before filing; mismatches are a leading cause of delays. For the number-crunching side, see how to calculate crypto gains for tax.
None of this affects the legality of holding crypto, which remains legal to own and trade. For the full legal picture, read is cryptocurrency legal in India.
Frequently asked questions
Is the 1% TDS a separate tax from the 30%?
No. The 1% TDS is a prepayment of tax. It is adjusted against your final 30% liability, and any excess is refunded when you file.
Do I pay TDS even if I lost money on the trade?
Yes. TDS is charged on the transfer value, not on profit, so it applies even to loss-making or break-even trades. You claim it back as credit at filing.
Who deducts the TDS?
On FIU-registered Indian exchanges, the exchange usually deducts and deposits it automatically. In peer-to-peer deals, the buyer may be responsible, so get guidance to avoid mistakes.
What are the exact thresholds?
₹10,000 of VDA transactions in a year for most people, and ₹50,000 for "specified persons". Confirm the current thresholds with a qualified CA.
The 1% TDS is best thought of as an advance instalment, not a penalty: you get it credited or refunded. When planning your trades and their tax timing, keep an eye on our live markets and AI forecasts, and confirm the current TDS rules with a qualified CA or the Income Tax Department.
This article is AI-assisted, educational and general in nature. It is not financial advice and never a guarantee of profit. Every trade is at your own risk on your own exchange. See our risk disclosure and editorial policy.
