Crypto TDS in India: How 1% TDS Works When You Buy and Sell Crypto (2026)

Crypto taxation in India has two different concepts that investors often confuse:

VDA income tax and VDA TDS.

The special tax on income from transferring a Virtual Digital Asset (VDA) and the 1% TDS mechanism are not the same thing.

In simple terms, TDS is generally deducted at the time of a qualifying VDA transfer, while the TDS amount can later be claimed as tax credit against your overall tax liability.

For transactions from 1 April 2026 onward, VDA TDS provisions are covered under the Income Tax Act, 2025, with Section 393 replacing the earlier Section 194S framework. The Income Tax Department says the new Act largely retains the earlier TDS rates and thresholds.

Quick Information

Particular	Rule
TDS rate on qualifying VDA transfers	1%
Earlier provision	Section 194S
Provision from 1 April 2026	Section 393
Applies to	Qualifying transfers of Virtual Digital Assets
TDS is final tax?	No
TDS credit	Can be claimed against applicable tax liability
Crypto income tax	Separate from TDS
New Form for certain individual/HUF VDA TDS compliance	Form 141
Old Form 26QE	Replaced for transactions covered under the new Act

The Income Tax Department confirms that the TDS rates and monetary thresholds have largely remained unchanged under the Income Tax Act, 2025.

What Is Crypto TDS?

TDS means Tax Deducted at Source.

For qualifying crypto/VDA transfers, 1% of the applicable transaction consideration is deducted as TDS rather than waiting until you file your income tax return.

For example, if the applicable transaction value is:

₹1,00,000

and 1% TDS applies:

₹1,00,000 × 1% = ₹1,000

So ₹1,000 is deducted as TDS.

But this does not mean your crypto income tax is only ₹1,000.

That distinction is extremely important.

Is 1% TDS the Same as 30% Crypto Tax?

No.

They serve different purposes.

TDS

A withholding mechanism during the transaction.

VDA Income Tax

Tax calculated on taxable income from VDA transfers under the applicable special provisions.

For example, suppose:

Cost of crypto = ₹1,00,000

Transfer value = ₹1,50,000

Simplified gain:

₹50,000

The applicable VDA income-tax rules determine the tax on that income.

If 1% TDS was deducted on the relevant ₹1.5 lakh transaction value:

₹1,50,000 × 1% = ₹1,500

That ₹1,500 is TDS credit, not the final tax calculation.

Does TDS Apply When You Buy Crypto?

This needs an important clarification.

The VDA TDS provisions relate to the transfer of a VDA, and who is responsible for deducting the tax depends on the nature of the transaction and the parties involved.

So it is not correct to simply say:

“Every time you buy crypto, 1% TDS is automatically deducted.”

The transaction structure matters.

For example, where an individual/HUF purchases a VDA from a resident seller in a transaction covered by the relevant provision, the buyer may have the TDS obligation.

The Income Tax Department’s current Form 141 specifically provides a schedule for TDS on transfer of VDA by an Individual/HUF under Section 393(1), Table Sl. No. 8(vi).

What Happens When You Buy Crypto on an Exchange?

This depends on how the exchange facilitates the transaction.

Many Indian crypto exchanges handle applicable TDS compliance within the transaction process.

In some exchange arrangements, the exchange itself may handle the tax payment mechanism.

The Income Tax Department specifically provides for exchanges that agree to deposit tax on behalf of buyers or brokers under the applicable VDA TDS provisions. Such exchanges have a separate reporting mechanism under Form 142.

Therefore, investors should check their exchange’s transaction statement rather than assuming that they personally need to deposit TDS for every trade.

Example: Buying Crypto for ₹1 Lakh

Suppose you purchase crypto worth:

₹1,00,000

Assume the transaction is one on which 1% TDS applies.

TDS:

₹1,000

The transaction may therefore be reflected with the applicable TDS adjustment depending on the exchange/transaction mechanism.

The important point is that the ₹1,000 is not your final crypto income tax.

What Happens When You Sell Crypto?

The TDS treatment depends on the transaction structure and who is making the payment.

Suppose a qualifying VDA transfer has consideration of:

₹2,00,000

At 1%:

TDS = ₹2,000

The remaining consideration after TDS would be:

₹1,98,000

subject to the way the particular platform or transaction processes the deduction.

Again, the ₹2,000 is not necessarily your final tax liability.

Example: Buy and Sell the Same Bitcoin

Suppose you buy Bitcoin for:

₹1,00,000

Later, you sell it for:

₹1,50,000

Your simplified gain is:

₹50,000

Now suppose 1% TDS was deducted on the applicable ₹1,50,000 transfer value:

₹1,500

You should not calculate:

₹50,000 × 1% = ₹500

That is not how the TDS mechanism works.

TDS is generally linked to the consideration for the qualifying transfer, subject to the applicable provisions.

TDS Is Not Based on Your Profit

This is one of the biggest misunderstandings.

Suppose:

Purchase price = ₹2,00,000

Sale value = ₹2,20,000

Profit:

₹20,000

If 1% TDS applies to ₹2,20,000:

TDS = ₹2,200

Notice:

TDS = ₹2,200

while:

Profit = ₹20,000

The TDS isn’t simply 1% of your ₹20,000 profit.

What If You Sell Crypto at a Loss?

Suppose:

Purchase cost = ₹2,00,000

Sale value = ₹1,50,000

You have a simplified loss of:

₹50,000

If TDS applies to the transfer:

₹1,50,000 × 1% = ₹1,500

So TDS can still arise even though the transaction itself produces a loss.

This is one reason crypto investors shouldn’t think:

“I made no profit, so there cannot be any TDS.”

TDS and final taxable income are separate concepts.

Can You Get the TDS Back?

Potentially, yes.

TDS is generally treated as tax credit, not automatically as your final tax.

Suppose:

TDS deducted = ₹10,000

and your final tax liability after completing your income-tax calculation is:

₹8,000

Subject to your overall return and tax position, the excess may result in a refund.

On the other hand, if your final tax liability is:

₹30,000

and you already have:

₹10,000 TDS credit

the remaining tax payable would be approximately:

₹20,000

before considering other applicable credits, taxes and adjustments.

TDS vs Final Crypto Tax

Feature	Crypto TDS	VDA Income Tax
Purpose	Tax withholding	Tax on taxable income
Rate	1% where applicable	Separate VDA tax provisions apply
Based on	Applicable transfer consideration	Taxable VDA income
When	During qualifying transaction	Determined through tax return/computation
Final tax?	No	Yes, subject to overall computation
Can be credited?	Yes, subject to rules	Forms part of final tax liability

What Is the TDS Threshold?

The VDA TDS provisions include monetary thresholds, so the 1% requirement is not simply applicable to every crypto transaction regardless of size.

The Income Tax Department states that the Income Tax Act, 2025 largely retains the earlier TDS rates and thresholds.

For the earlier Section 194S framework, the commonly applicable thresholds were:

• ₹50,000 for specified persons
• ₹10,000 for other cases

Because the new Act has reorganized the provisions from April 2026, taxpayers should verify the applicable threshold for their specific transaction and status rather than relying on an old exchange article or outdated tax guide.

Who Has to Deduct Crypto TDS?

The responsibility can depend on who is transferring the VDA, who is paying, and whether the transaction is through an exchange or another arrangement.

For individual/HUF transactions, the new Form 141 specifically covers TDS on VDA transfers under Section 393(1), Table Sl. No. 8(vi).

An exchange may also have an arrangement under which it deposits the applicable tax on behalf of buyers or brokers. The Income Tax Department provides Form 142 for exchanges that have agreed to such a mechanism.

So the practical answer is:

Don’t assume the buyer or seller always personally has to deposit the TDS. Check how the particular transaction is structured.

What Happens on a Crypto-to-Crypto Swap?

Suppose you exchange:

Bitcoin → Ethereum

You don’t receive Indian rupees.

That doesn’t automatically make the transaction outside the VDA tax framework.

The Income Tax Department’s current Form 141 specifically recognizes VDA transactions made in cash or in exchange for another VDA.

Therefore, crypto-to-crypto transactions should not simply be ignored when maintaining tax records.

Example: Bitcoin to Ethereum

Suppose:

Bitcoin transfer value = ₹1,00,000

If the applicable TDS provision applies:

1% = ₹1,000

The fact that you received Ethereum instead of cash does not automatically remove the transaction from the VDA reporting framework.

The exact withholding mechanics can depend on the exchange and transaction structure.

What About Multiple Crypto Trades?

Suppose you make 10 qualifying transactions:

Transaction	Value	1% TDS
Trade 1	₹50,000	₹500
Trade 2	₹80,000	₹800
Trade 3	₹1,00,000	₹1,000
Trade 4	₹60,000	₹600
Trade 5	₹40,000	Depends on threshold/applicability
Trade 6	₹90,000	₹900
Trade 7	₹1,20,000	₹1,200
Trade 8	₹70,000	₹700
Trade 9	₹30,000	Depends on threshold/applicability
Trade 10	₹1,50,000	₹1,500

The actual TDS depends on the applicable threshold and transaction circumstances.

You should therefore maintain transaction-level records, not simply calculate 1% of your annual crypto trading volume.

Does TDS Apply to Every Trade on an Exchange?

Not necessarily.

The answer depends on:

• Transaction value
• Applicable threshold
• Whether the transaction is covered
• Your taxpayer category
• Whether an exchange is involved
• How the transaction is settled
• Whether the exchange handles the applicable TDS compliance

Your exchange’s tax statement can be particularly useful for reconciling the TDS actually deducted.

What Is Form 141?

From 1 April 2026, the Income Tax Department introduced Form 141 as a unified challan-cum-statement for specified TDS transactions under Section 393.

It replaces earlier forms including Form 26QE for the VDA category.

For VDA transactions, Schedule D of Form 141 deals with TDS on transfer of VDA by an Individual/HUF.

The form allows the taxpayer to provide transaction details, including whether the transaction is:

• Cash, or
• In kind / exchange for another VDA.

What Was Form 26QE?

Before the new Income Tax Act, 2025 came into effect, VDA TDS under Section 194S used Form 26QE for certain transactions.

The Income Tax Department explains that Form 141 consolidates the earlier PAN-based challan-cum-statements, including 26QE, under the new Act.

So if you are reading an older crypto tax article that tells you to use Form 26QE for a transaction occurring after 1 April 2026, be careful—the reporting framework has changed.

What If the Exchange Deducts TDS for You?

This is generally much easier for the investor.

The exchange may:

1. Calculate applicable TDS
2. Deduct it from the transaction
3. Deposit/report it according to the applicable rules
4. Reflect the transaction and tax information in your records

The Income Tax Department has a specific compliance mechanism for exchanges that have agreed to deposit tax on behalf of buyers or brokers.

Still, you should retain your:

• Exchange statements
• TDS records
• Transaction history
• AIS/tax information
• Relevant return documents

How to Check Your Crypto TDS

Before filing your income-tax return, compare:

Exchange TDS statement

↓

AIS / available tax information

↓

TDS credit

↓

Your crypto transaction records

↓

Income-tax return

If the figures don’t match, investigate the difference before filing.

Does 1% TDS Mean Crypto Is Taxed at 1%?

No.

This is probably the most important takeaway from the entire topic.

Suppose:

Crypto profit = ₹1,00,000

You cannot simply say:

Crypto tax = ₹1,000

because 1% TDS is not the final VDA income-tax rate.

The TDS is a withholding mechanism.

Your final tax computation is separate.

What If TDS Is More Than Your Profit?

This can happen because TDS is linked to the applicable transaction consideration rather than simply your net profit.

For example:

Purchase = ₹1,00,000

Sale = ₹1,05,000

Profit:

₹5,000

But 1% TDS on ₹1,05,000 would be:

₹1,050

So TDS could represent a substantial portion of the actual profit in such a transaction.

The excess, if any, is handled through the overall tax-return process rather than automatically becoming the final tax.

Crypto TDS and Crypto Losses

TDS should not be confused with the treatment of VDA losses.

Suppose you have:

₹1 lakh VDA loss

and:

₹5,000 TDS deducted

You cannot simply say that your loss has become a ₹5,000 tax refund automatically.

The TDS is a tax credit, while the special VDA loss rules determine how the loss itself is treated.

This distinction becomes particularly important for active traders.

What Records Should Crypto Investors Keep?

Maintain:

• Date of transaction
• Crypto asset
• Quantity
• Purchase value
• Transfer/sale value
• Exchange
• TDS deducted
• Transaction ID/order ID
• Wallet transfers where relevant
• TDS certificates/statements
• AIS information

If you trade frequently, export transaction records regularly rather than waiting until the end of the tax year.

What Happens From 1 April 2026?

India’s Income Tax Act, 2025 came into effect for the relevant tax year beginning 1 April 2026.

The Income Tax Department states that the earlier TDS provisions have been consolidated into Sections 392 and 393, while the rates and monetary thresholds are largely retained.

For VDA transactions from 1 April 2026 onward, the relevant TDS provision is under Section 393, rather than the old Section 194S numbering.

This distinction matters when reading older crypto-tax content.

Common Crypto TDS Mistakes

Thinking 1% Is the Final Tax

It isn’t.

Calculating TDS on Profit

TDS is not simply 1% of your profit.

Assuming Every Crypto Purchase Has TDS

Applicability depends on the transaction and taxpayer circumstances.

Ignoring Crypto-to-Crypto Transactions

VDA-to-VDA exchanges can fall within the relevant framework.

Ignoring Small Transactions

Threshold rules matter, so maintain proper records.

Treating TDS and Income Tax as the Same Thing

They are separate components of the tax system.

Relying on Old Section 194S Information

For transactions from 1 April 2026, the relevant provisions are under the new Act, including Section 393.

Final Verdict

The easiest way to understand India’s crypto TDS system is:

1% TDS is a tax-withholding mechanism, not a 1% final tax on your crypto profit.

For qualifying VDA transfers, TDS can be deducted at 1% of the applicable transaction consideration, subject to the relevant thresholds and transaction rules.

Your final crypto tax is calculated separately under the applicable VDA taxation provisions.

For transactions from 1 April 2026, the Income Tax Act, 2025 has reorganized the TDS provisions under Section 393, while the Income Tax Department says the underlying TDS rates and thresholds are largely unchanged.

If an exchange handles the TDS, keep its statements and reconcile them with your tax records. If you are responsible for the deduction yourself, the new Form 141 framework applies to relevant VDA TDS transactions by individuals/HUFs.

In short:

Crypto transaction → applicable 1% TDS, where required → TDS credit → calculate actual VDA tax separately → claim available TDS credit while filing your return.

For high-volume trading, crypto-to-crypto swaps, P2P transactions, self-custody wallets or unusual transaction structures, professional tax review is advisable because the withholding and reporting obligations can become more complicated.