Quick answer
Every crypto trade on an Indian exchange triggers 1% TDS — deducted before you receive your proceeds.
Regulations
India
Section 194S TDS
1% tax deducted at source on crypto transfers in India above threshold values, applicable to exchanges and buyers.
IndiaUnderstanding Section 194S TDS on crypto
Section 194S of the Income Tax Act, introduced from 1 July 2022, mandates a 1% Tax Deducted at Source (TDS) on payments made on the transfer of Virtual Digital Assets (VDAs) above specified thresholds. For transactions on exchanges, the exchange deducts the TDS before crediting proceeds. For P2P transactions, the buyer is responsible for deducting TDS. The thresholds are: ₹50,000 per financial year for transactions with specified persons (businesses), and ₹10,000 for others. TDS can be claimed as a credit against the taxpayer's total tax liability at year-end, but it represents a significant cash flow constraint for active traders.
Section 194S of the Income Tax Act, introduced from 1 July 2022, mandates a 1% Tax Deducted at Source (TDS) on payments made on the transfer of Virtual Digital Assets (VDAs) above specified thresholds. For transactions on exchanges, the exchange deducts the TDS before crediting proceeds. For P2P transactions, the buyer is responsible for deducting TDS. The thresholds are: ₹50,000 per financial year for transactions with specified persons (businesses), and ₹10,000 for others. TDS can be claimed as a credit against the taxpayer's total tax liability at year-end, but it represents a significant cash flow constraint for active traders.
What this means for your crypto activity
1% on qualifying sales
1% TDS is deducted from your crypto sale proceeds on every qualifying transaction above threshold.
TDS credit in ITR
You can claim TDS as a credit against your total tax liability in your ITR.
Cash flow for traders
For active traders, cumulative TDS can lock up significant capital throughout the year.
P2P buyer responsibility
P2P buyers are responsible for deducting TDS — failure to deduct creates their own tax liability.
Scope of application
TDS applies to fiat withdrawals from exchanges, not just crypto-to-crypto swaps in some interpretations.
- 1% TDS is deducted from your crypto sale proceeds on every qualifying transaction above threshold.
- You can claim TDS as a credit against your total tax liability in your ITR.
- For active traders, cumulative TDS can lock up significant capital throughout the year.
- P2P buyers are responsible for deducting TDS — failure to deduct creates their own tax liability.
- TDS applies to fiat withdrawals from exchanges, not just crypto-to-crypto swaps in some interpretations.
Seeing it in action
Example scenario
Rohan sells ₹5,00,000 of BTC on WazirX. The exchange deducts 1% TDS = ₹5,000 before crediting his account. His total VDA gain for the year is ₹2,00,000, resulting in 30% tax = ₹60,000. The ₹5,000 TDS is credited against his ₹60,000 liability, so he pays ₹55,000 net. If his TDS exceeds his tax liability, he can claim a refund.
How this works across jurisdictions
- India
Section 194S effective 1 July 2022; 1% TDS on VDA transfers above ₹50,000 (specified persons) or ₹10,000 (others) per financial year; deducted by exchange or buyer; credited against ITR liability.
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