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The 1% TDS, Explained
Why is 1% deducted when I sell crypto in India, and do I get it back?
This chapter explains when the 1% TDS under Section 194S applies, who deducts it, and the ₹50,000/₹10,000 payer limits. It also covers why the 1% can come back as a refund, and how to check it against your PAN in Form 26AS and the AIS.
Module 1 · Chapter 7 of 10 · ~5 min read · Tax and law facts as of August 2026
The last chapter covered tax on a break-even year. This chapter covers a smaller cut that lands earlier: the 1% TDS, taken before you see the money.
- 1%TDS rate
- ₹50,000specified-person cap
- ₹10,000other payers
- 31.2%effective tax
What the 1% Actually Cuts
TDS means Tax Deducted at Source: India collects tax upfront, before it reaches your bank account.
Section 194S of the Income-tax Act, 1961 cuts 1% from the transfer value of every eligible crypto sale.
From 1 April 2026 the rule moves to Section 393(1), Table serial number 8(vi), Income-tax Act 2025. The rate and limits stay unchanged (as of August 2026).
On an exchange registered with FIU-IND, India's Financial Intelligence Unit for crypto platforms, the deduction happens automatically.
The exchange deposits that ₹1,000 against your PAN (Permanent Account Number) with the tax department.
Who This Applies To: The ₹50,000 and ₹10,000 Limits
The floor is measured on the buyer's side of the trade, not the seller's. Section 194S puts the duty to deduct on whoever pays.
A "specified person" is an individual or HUF with no business income, or a smaller payer (caps below).
| Who is paying for the crypto | Threshold per year |
|---|---|
| Specified person: individual/HUF with no business income, or turnover up to ₹1 crore / receipts up to ₹50 lakh in the preceding year | ₹50,000 |
| Everyone else: companies, firms, exchanges, audited businesses | ₹10,000 |
On an Indian exchange, the exchange itself is the payer. Its ₹10,000 limit is crossed almost at once, so 1% gets deducted on nearly every eligible sell.
The ₹50,000 limit only applies when you buy crypto off-exchange yourself. Limits run per financial year, 1 April to 31 March, resetting every year.
TDS Is Not a New Tax
The 1% cut feels like an extra tax, but it isn't. It's an advance payment, adjusted against whatever tax you owe.
Crypto TDS works just like the TDS on salary, always counting toward your final tax bill.
Your liability is a flat 30% under Section 115BBH, plus 4% health and education cess. That's 31.2% effective, with no loss set-off (as of August 2026).
| Trader | TDS deducted | Final tax owed | Result |
|---|---|---|---|
| Trader A | ₹4,000 | ₹3,000 | ₹1,000 refund |
| Trader B | ₹1,000 | ₹9,360 | ₹8,360 still to pay |
Trader B's ₹9,360 bill is 31.2% of a ₹30,000 gain for the year. The gap depends on how much you traded and earned.
When TDS exceeds the tax due, the excess comes back as a refund. It arrives once the tax department finishes processing your return.
Checking Your PAN: Form 26AS and AIS
Before filing, confirm the TDS reached your PAN. Two documents on the income tax portal show what was deposited.
Form 26AS is a tax credit statement tied to your PAN. It lists every TDS deducted in your name, including crypto.
The Annual Information Statement (AIS) covers your wider financial year. It also picks up crypto transactions reported to the department.
Where Beginners Get Caught: Coin-to-Coin and P2P
A coin-to-coin swap means trading one crypto directly for another, say Bitcoin for Ethereum. No rupees change hands, but it still counts as a transfer.
Both sides are handing over a digital asset. Under CBDT (Central Board of Direct Taxes) guidance, both legs can attract 1% TDS.
Peer-to-peer (P2P) and foreign-platform trades work in a different way. No Indian exchange sits in the middle to deduct and deposit the tax.
A P2P trade means dealing directly with another person, through a P2P marketplace or fully off-platform.
Traders who follow crypto trading signals trade often, and every trade adds to the yearly TDS math.
The next chapter covers Schedule VDA and the paper trail behind every number you file.
Key takeaways
- Section 194S taxes the transfer value, not your profit, so losing trades get cut too. From 1 April 2026 it moves to Section 393(1), Income-tax Act 2025. The rate and limits are unchanged (as of August 2026).
- The limit is ₹50,000 a year for a specified person, ₹10,000 for everyone else (as of August 2026).
- On an FIU-IND-registered exchange, the exchange is the payer. It deducts on nearly every sell and deposits it against your PAN.
- TDS is an advance credit against the 30% plus 4% cess bill, not extra tax. Overpaid TDS comes back as a refund.
- Check Form 26AS and the AIS before filing. The portal can restrict your credit to only what Form 26AS shows.
- Coin-to-coin swaps can trigger 1% TDS on both legs. In P2P trades the buyer deducts, files Form 26QE and issues Form 16E.
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Educational & illustrative only — not investment advice. Drishti Pro publishes AI-generated trade ideas and their public track record for information. Crypto is volatile and you can lose money. Nothing here is a recommendation to buy or sell any asset. Do your own research.