Cryptocurrency taxation in India can be confusing, especially when it comes to 1% TDS on crypto transactions. Many investors assume that paying 1% TDS means their total cryptocurrency tax is only 1%. That is not correct.
India has a separate tax framework for Virtual Digital Assets (VDAs). The TDS mechanism is intended to track certain crypto transactions, while the final tax on income from the transfer of covered VDAs is a separate matter.
For transactions from April 1, 2026, the new Income-tax Act, 2025 applies to the relevant TDS provisions. The Income Tax Department confirms that the applicable TDS rates and monetary thresholds have been retained during the transition.
What Is Crypto TDS?
Crypto TDS is a tax deducted at source on specified transfers of Virtual Digital Assets.
Under the earlier Income-tax Act, 1961, this requirement was covered by Section 194S. For transactions governed by the new Income-tax Act, 2025 from April 1, 2026, the corresponding provision is contained in Section 393(1), Table Sl. No. 8(vi).
The basic purpose is to collect tax at the transaction stage and create a record of VDA transfers.
Is Crypto TDS Really 1%?
Yes, the applicable TDS rate for specified VDA transfers is 1% of the consideration, subject to the applicable conditions and thresholds.
However, this 1% should not be confused with the final tax payable on crypto income.
For example, suppose you sell qualifying cryptocurrency for ₹2,00,000 and the transaction is subject to TDS.
Transaction value: ₹2,00,000
TDS at 1%: ₹2,000
The ₹2,000 is TDS. It does not automatically mean that your final crypto tax liability is ₹2,000.
When Is 1% Crypto TDS Deducted?
TDS applies when consideration is paid for the transfer of a specified Virtual Digital Asset, subject to the statutory conditions and thresholds.
The important point is that TDS is linked to the consideration for the transfer, rather than simply the profit earned by the investor.
Therefore, even if your actual profit is much smaller than the transaction value, the TDS mechanism can still apply where the transaction meets the applicable requirements.
What Are the TDS Thresholds?
The law provides monetary thresholds for crypto TDS.
The threshold differs depending on the category of the person making the payment.
Broadly, the provisions distinguish between specified persons, such as certain individuals or Hindu Undivided Families, and other persons.
Because the applicable threshold depends on the taxpayer’s status and the transaction circumstances, investors should check the current statutory limits before calculating their TDS obligation.
This is particularly important for people making frequent transactions throughout the financial year.
Who Deducts the 1% TDS?
The responsibility for deducting TDS depends on the nature of the transaction and the parties involved.
In a straightforward transaction, the buyer or payer can have the TDS obligation.
However, cryptocurrency exchanges can also have specific compliance arrangements. The Income Tax Department provides a mechanism under which an exchange can agree to deposit the applicable tax on behalf of buyers or brokers in qualifying circumstances.
This is why investors may see TDS deducted automatically when trading through an exchange.
How Does Crypto TDS Work on an Exchange?
Suppose you sell cryptocurrency through an exchange for ₹1,00,000 and the transaction is subject to 1% TDS.
The exchange may deduct:
₹1,00,000 × 1% = ₹1,000
The remaining amount is then credited or paid according to the platform’s transaction mechanism.
The deducted amount should be properly reported so that the investor can receive credit for the TDS in the income-tax records.
Is TDS Deducted on Crypto Profit or Sale Value?
This is one of the most important points to understand.
Crypto TDS is generally calculated with reference to the consideration for the transfer, not simply the profit.
For example:
- Purchase price: ₹80,000
- Sale price: ₹1,00,000
- Profit: ₹20,000
- TDS at 1% of consideration: ₹1,000
The TDS is therefore based on the applicable transaction consideration rather than simply the ₹20,000 profit.
Is 1% TDS the Final Crypto Tax?
No.
TDS and final income tax are two different things.
India’s VDA taxation framework provides a special tax regime for income arising from the transfer of covered VDAs. The TDS deducted during the transaction can generally be claimed as tax credit against the taxpayer’s final liability, subject to the applicable rules.
Therefore:
1% TDS ≠ 1% final crypto tax
An investor could have 1% TDS deducted during a transaction and still have a separate tax liability when filing the income-tax return.
What Happens to the TDS You Paid?
The deducted TDS is reported against the taxpayer’s tax records.
Investors should check their Form 26AS and Annual Information Statement (AIS) to ensure that the applicable TDS has been correctly reflected.
If the TDS has been properly credited, it can generally be taken into account while calculating the final tax payable.
Keeping exchange statements and transaction records is therefore important.
What About Crypto-to-Crypto Transactions?
Crypto-to-crypto transactions can create additional complexity.
For example, suppose you exchange Bitcoin for another cryptocurrency rather than receiving Indian Rupees.
The absence of cash does not automatically mean that there is no tax or TDS implication.
The Income Tax Department’s current Form 141 guidance specifically recognises VDA transactions involving cash, transactions in kind and exchanges involving another VDA.
Investors carrying out crypto-to-crypto swaps should therefore maintain detailed records and obtain professional advice where necessary.
What Changed From April 1, 2026?
India’s new Income-tax Act, 2025 came into effect for the relevant tax framework from April 1, 2026.
The Income Tax Department has clarified that transactions where the earlier event of credit or payment occurs on or before March 31, 2026 are governed by the old Income-tax Act, 1961. Transactions where that event occurs on or after April 1, 2026 are governed by the corresponding provisions of the Income-tax Act, 2025.
The Department has also clarified that the TDS rates and monetary thresholds have not changed merely because of the transition to the new Act.
For VDA TDS reporting from April 1, 2026, Form 141 is used for applicable resident deductees, with Schedule D specifically covering TDS on transfer of VDAs.
Do You Need a TAN for Crypto TDS?
For the specified challan-cum-statement mechanism applicable to VDA transfers, the Income Tax Department’s guidance indicates that the payer/deductor is not required to obtain a TAN for filing the relevant form.
This is one reason crypto TDS compliance differs from some other types of TDS transactions.
What Records Should Crypto Investors Keep?
If you actively trade cryptocurrency, maintain records of:
- Purchase date and price
- Sale date and consideration
- Cryptocurrency quantity
- Exchange statements
- TDS deducted
- Wallet addresses and transfer records
- Crypto-to-crypto exchange details
- Transaction fees
- TDS certificates or relevant tax records
- AIS and Form 26AS entries
Good recordkeeping can make ITR filing considerably easier, especially when there are many transactions.
Common Crypto TDS Mistakes
Assuming 1% TDS Is the Only Tax
TDS is not the same as the final tax liability.
Calculating TDS Only on Profit
The TDS mechanism is linked to consideration for the transfer, subject to the applicable rules.
Ignoring Small Transactions
Multiple transactions can collectively cross applicable thresholds or create significant reporting requirements.
Not Checking Form 26AS or AIS
Investors should verify that deducted TDS is correctly reflected.
Ignoring Crypto-to-Crypto Transactions
A transaction does not necessarily escape tax or reporting simply because no Indian Rupees were received.
Frequently Asked Questions
Is crypto TDS still 1% in India in 2026?
The applicable TDS rate for specified VDA transfers remains 1%, subject to the conditions and thresholds prescribed under the applicable law. The transition to the Income-tax Act, 2025 did not itself change the TDS rates.
Is 1% TDS deducted on crypto profit?
No. The TDS mechanism is generally linked to the consideration for the transfer rather than simply the profit earned.
Is crypto TDS refundable?
TDS is a credit against the taxpayer’s tax liability, subject to the applicable tax rules. If the total tax deducted exceeds the final tax liability, a refund may be available through the income-tax return process.
Is crypto TDS the same as the 30% crypto tax?
No. TDS is a withholding mechanism, whereas the special VDA tax regime determines the applicable tax on income from the transfer.
How can I check crypto TDS?
Investors should check their tax records, including Form 26AS and AIS, and reconcile them with statements from their cryptocurrency exchange.
Conclusion
The 1% crypto TDS in India is a transaction-level tax deduction applicable to specified transfers of Virtual Digital Assets, subject to the prescribed conditions and thresholds. It is important to remember that this is not the final tax on cryptocurrency profits.
For transactions from April 1, 2026, the relevant TDS framework operates under the Income-tax Act, 2025, while earlier transactions fall under the Income-tax Act, 1961. The Income Tax Department has retained the applicable TDS rates and thresholds during this transition.
For Indian crypto investors, the safest approach is to maintain complete transaction records, verify TDS credits in tax statements and report VDA transactions correctly while filing the income-tax return.