TDS on crypto (section 194S) explained: rate, limits and how it is adjusted

TDS is tax deducted at source: the person paying you takes off a share of the payment and pays it to the government in your name. On the transfer of a virtual digital asset the rate is 1% of the sum paid as consideration. It is section 194S of the 1961 Act, in force from 1 Jul 2022, and section 393(1), Table Sl. No. 8(vi) of the Income-tax Act, 2025 for tax years starting 1 April 2026. Sources read: the circular that explains it and the 2025 Act table.

The 1% is taken on the sale value, not on the gain, and it applies to a sale at a loss too. The consideration it is taken on leaves out GST and the payer's own service charge.

Nothing is deducted until the total consideration one payer pays you in a financial year passes a limit. The limit depends on who you are.

A specified person is an individual or HUF who has no business or professional income, or whose business turnover or professional receipts in the previous year were within the limits the circular sets. Most people who only invest are in this group. The limit is counted for each payer, so sales through two platforms are counted separately.

If you have not given a PAN, the rate is 20% instead. We have not confirmed the section behind that rate, and the calculator does not apply it.

• On an exchange, the exchange or its broker deducts it as the payer.
• Outside an exchange, for example when two people trade directly, the buyer must deduct it. Where the payment is wholly or partly in crypto, the buyer has to see that the tax is paid before releasing it.
• Crypto for crypto. Where an exchange opts in to the circular's method, it deducts on both legs of the trade, withholding 1% of each coin in kind and selling the withheld coins to pay the government.

TDS is not an extra tax. It is a payment on account of the tax you owe on the same income. When you file, you total the tax on all your gains: 30% of each gain plus 4% cess. Then you subtract the TDS shown against your PAN. If the TDS is more than the tax, the difference is claimed back as a refund. If it is less, you pay the rest.

Because the TDS is on the sale value, it can be much more than the tax: a small gain, or a loss, still has 1% of the whole price held back. Check what was actually deducted in your Form 26AS and the Annual Information Statement before you file. The other half of the story is in the crypto tax guide.

Five made-up sales in one financial year through one platform, by a specified person, worked out by the same engine as the crypto tax calculator. The running total shows when the ₹50,000 limit is crossed. The calculator assumes 1% is deducted from the payment that crosses the limit and from every later payment, and not on the earlier ones.

Against the tax

Try your own sales in the crypto tax calculator

• Thinking the TDS settles the tax. It is a credit, and the tax on your gains can be more or less.
• Thinking a loss means no TDS. It is taken on the sale value whether you gained or lost.
• Counting all your platforms together for the yearly limit. The limit is per payer.
• Not comparing the TDS in Form 26AS and the Annual Information Statement with your own records.
• Forgetting that a swap on an exchange can have TDS on both sides of the trade.

The Income Tax Department's site returned an error to our reader, so the circular was read as reproduced by a tax site. These points need a chartered accountant to confirm for your case:

• Not yet verified: the exact sub-section of the 2025 Act holding these thresholds (TaxTMI cites s.393(4), Sl. No. 12); the s.393(1) table we read shows a nil threshold and the limits elsewhere in the section.
• Not yet verified: how an in-kind deduction reaches your Form 26AS.
• Not yet verified: the section behind the 20% rate (206AA in the 1961 Act) and whether a higher rate also applies to non-filers (206AB / the 2025 Act equivalent); neither is modelled.
• Not yet verified: whether TDS applies from the first payment that takes the year's total past the threshold or on the whole year's total; RupeeScope deducts 1% from the payment that crosses the threshold onwards and not before, and says so in its assumptions.