Under Section 194S, Indian crypto exchanges must deduct 1% TDS on every sale of Virtual Digital Assets once your total sells exceed ₹10,000 in a financial year — this is an advance tax payment, not an additional tax, and you reclaim credit for it when filing your ITR. International exchanges (Binance, Bybit, KuCoin) do not deduct TDS, so you pay the full 30% tax when you file.
- TDS rate: 1% on gross sale value (20% if no valid PAN)
- Threshold: ₹10,000 total sells per year (₹50,000 for "specified persons")
- Who deducts: Indian exchanges automatically; off-exchange P2P buyers must do it themselves
- How to check: Form 26AS and Annual Information Statement (AIS) — look for Section 194S entries
- Refund possible: If total TDS exceeds your final tax liability, you get a refund
Here is everything you need to know about how crypto TDS works, including P2P rules, how to verify your 26AS entries, and how to claim the credit when filing.
What is Section 194S?
Introduced on July 1, 2022, Section 194S requires any person paying for a Virtual Digital Asset (crypto) to deduct 1% TDS from the payment. In practical terms, when you sell crypto on an Indian exchange, the exchange deducts 1% of the total transaction value before crediting your account.
Here's a quick example: You sell crypto worth ₹5,00,000 on CoinDCX. The exchange deducts ₹5,000 as TDS (1% of ₹5,00,000) and credits ₹4,95,000 to your wallet. That ₹5,000 goes to the government on your behalf.
Who Deducts the TDS?
This is where it gets interesting. The responsibility to deduct TDS falls on the buyer (the person paying for the crypto). But in practice:
- On exchanges: The exchange acts as an intermediary and handles TDS deduction. When you place a sell order that gets matched with a buyer, the exchange deducts 1% from your sale proceeds. You don't need to do anything — it happens automatically.
- P2P trades through exchanges: The exchange still deducts TDS since they facilitate the transaction.
- Direct P2P (off-exchange): The buyer is responsible for deducting 1% TDS and depositing it with the government. This is where things get messy — most individual buyers don't know they're supposed to do this.
TDS Thresholds: When Does It Apply?
TDS isn't deducted on every tiny trade. There are thresholds:
- General threshold: TDS applies when total payments for VDA transfers to a person exceed ₹10,000 in a financial year
- For specified persons: The threshold is higher at ₹50,000 — this applies if the buyer is an individual or HUF whose total sales/turnover from business doesn't exceed ₹1 crore (for business) or ₹50 lakh (for profession) in the preceding financial year, and who doesn't have a tax audit requirement
In practice, on exchanges, the ₹10,000 threshold applies to most regular traders. Once your total sell value crosses ₹10,000 in a financial year, TDS kicks in on every subsequent sale.
Something worth noting: the threshold is calculated per buyer-seller pair. But on exchanges, since the exchange pools all buyers, it's effectively based on your total sells on that exchange.
TDS Rate Breakdown
The standard rate is 1%. But there are variations:
- 1% — Standard rate when the seller has a valid PAN
- 20% — If the seller hasn't furnished their PAN or has an invalid PAN. This is why exchanges require KYC.
- 5% — If the seller has not filed ITR for the past two years and the TDS deducted exceeded ₹50,000 in each of those years (Section 206AB non-filer provision)
Most traders with a valid PAN and compliant filing history will pay the standard 1%.
TDS on Different Types of Trades
Let me clear up how TDS works across different trading scenarios:
Selling Crypto for INR
Straightforward. You sell BTC for ₹5,00,000, exchange deducts ₹5,000 TDS. Simple.
Crypto-to-Crypto Trades
This is tricky. When you swap BTC for ETH, technically both parties are transferring a VDA. The exchange should ideally deduct TDS from both sides. In practice, most Indian exchanges handle this in the background, and you'll see the TDS reflected in your account.
P2P Trades on Exchanges
When you sell crypto through P2P on WazirX or CoinDCX, the exchange still deducts 1% TDS. The buyer pays the full amount, but the exchange withholds 1% of the crypto value from your proceeds before releasing payment to you.
International Exchanges
Here's the thing — Binance, KuCoin, Bybit, and other international exchanges do not deduct TDS. They aren't Indian companies, so Section 194S doesn't apply to them. But your income is still taxable. You'll just need to pay the full 30% + cess when filing your ITR, without any TDS credit to reduce it.
How to Check Your TDS: Form 26AS and AIS
Your TDS deductions should appear in two places:
Form 26AS
This is your consolidated tax credit statement. Log into the TRACES portal (traces.in) or access it through the income tax portal. Look for entries under Section 194S. Each exchange that deducted TDS will appear with their TAN, the amount deducted, and the quarter in which it was deposited.
Annual Information Statement (AIS)
Available on the income tax portal under Services → AIS. This is a more comprehensive view that shows not just TDS but also your reported transactions. You'll see:
- Total consideration (sale amounts) reported by each exchange
- TDS deducted under 194S
- High-value transactions flagged by reporting entities
Always cross-check both. Sometimes there are timing delays — an exchange might deposit Q4 TDS (Jan-Mar) after the financial year ends, so it may not show up in 26AS immediately. Usually it's reflected by May-June.
Claiming TDS Credit When Filing ITR
This is the payoff. All that TDS deducted throughout the year reduces your final tax bill.
Let me show you with numbers. Say your total crypto tax liability for FY 2024-25 is ₹62,400 (that's ₹2,00,000 profit × 30% = ₹60,000 + 4% cess ₹2,400). Throughout the year, exchanges deducted a total of ₹18,000 in TDS across your various sells.
Your remaining tax payable: ₹62,400 - ₹18,000 = ₹44,400
You'd pay this ₹44,400 as self-assessment tax before filing your ITR.
Here's the flip side: if your total TDS exceeds your tax liability (say you had lots of sells but minimal profit because you sold near your buy price), you'll get a refund. Yes, you can get TDS refunded — that's the whole point of it being an advance payment, not a final tax.
Common TDS Issues and How to Fix Them
TDS Not Showing in 26AS
Wait until the exchange deposits it (usually within 30 days of the quarter ending). If it's been months, contact the exchange's support — they may have a TAN mismatch or reporting error.
TDS Amount Doesn't Match Your Records
Exchanges calculate TDS on the gross transaction value, which might differ slightly from what you see due to rounding. If the difference is small (a few rupees), don't worry about it. If it's significant, raise a ticket with the exchange.
You Traded on Multiple Exchanges
Each exchange reports TDS separately under their own TAN. Your 26AS will show multiple entries — that's normal. Add them all up for your total TDS credit.
Buyer Didn't Deduct TDS on P2P
If you did a direct off-exchange P2P deal and the buyer didn't deduct TDS, the tax liability still falls on the buyer. But as the seller, you might not get the credit. Report your income honestly and pay the full tax. You can mention in your records that the buyer failed to deduct TDS.
Don't Leave Money on the Table
I've seen traders forget to claim their TDS credit and end up paying more tax than they needed to. It's literally your money — the government collected it in advance on your behalf. When you file your ITR, make sure every rupee of TDS from every exchange is accounted for in Schedule TDS.
Use CryptoITR to automatically track TDS across your exchange reports. When you upload your trade data, we pull out the TDS amounts and include them in your tax computation — so you always know exactly how much credit you're entitled to.