Section 194S — 1% TDS on Crypto & Virtual Digital Assets

1% of the consideration for the transfer of a VDA. The rate rises to 20% under Section 206AA if the seller has not furnished a valid PAN. The 1% rate is unchanged for FY 2025-26 / AY 2026-27 — Budget 2025 did not alter it.

Yes. Section 194S covers the transfer of any Virtual Digital Asset, which includes both cryptocurrencies (Bitcoin, Ethereum, USDT and similar tokens) and non-fungible tokens (NFTs) notified as VDAs. The same 1% TDS, thresholds and deduction mechanics apply.

Two thresholds apply per financial year: Rs50,000 for a "specified person" — an individual or HUF whose business turnover was up to Rs1 crore or professional receipts up to Rs50 lakh in the preceding FY, or an individual/HUF with no business or professional income; and Rs10,000 for all other deductors (companies, firms, and individuals/HUF above the audit limits). The threshold is the aggregate consideration paid to a seller during the year — once crossed, 1% applies.

No. There have been proposals to raise the specified-person threshold from Rs50,000 to Rs1,00,000, but this has not been enacted. For FY 2025-26 / AY 2026-27 the thresholds remain Rs50,000 (specified persons) and Rs10,000 (others), with the 1% rate unchanged.

The legal obligation is on the buyer. In practice, when you trade through an Indian crypto exchange, the exchange deducts the 1% TDS on the buyer's behalf at the time of trade and deposits it against the seller's PAN — clarified in CBDT Circular 13/2022. In peer-to-peer trades where no exchange is involved, the buyer must personally deduct, deposit and report the TDS. On foreign exchanges that do not deduct Indian TDS, the Indian buyer remains responsible.

Yes. When one VDA is exchanged for another (e.g., Bitcoin swapped for Ethereum), both parties are treated as buyers of the asset they receive and sellers of the asset they give up. TDS at 1% therefore applies on both legs of the swap. Since consideration is in kind, each party must ensure tax has been paid on their leg before releasing the asset — on Indian exchanges the exchange usually handles this on both sides.

The compliance obligation under Section 194S still rests with you as the Indian buyer. Foreign exchanges generally do not deduct Indian TDS, so you must deduct 1% (subject to the applicable threshold), deposit it and file the relevant statement yourself. Ignoring this can lead to interest, penalty and disallowance issues.

It depends on the deductor. A specified person (individual/HUF below the audit thresholds) does not need a TAN — they deposit the TDS using Form 26QE, a challan-cum-statement filed within 30 days from the end of the month of deduction, and issue Form 16E to the seller. All other deductors (companies, firms, exchanges) must have a TAN, deposit by the 7th of the following month, and report in the quarterly Form 26Q, issuing Form 16A to the seller.

Not if you are a specified person (an individual or HUF below the tax-audit limits). You can deposit using Form 26QE with your PAN alone. All other deductors — companies, firms and exchanges — must obtain a TAN and report the deduction in the quarterly Form 26Q return.

Failure to deduct or late deduction/deposit attracts interest at 1% per month (non-deduction) or 1.5% per month (deducted but not deposited). Late filing of Form 26QE attracts a fee of Rs200 per day under Section 234E (capped at the TDS amount), and non-deduction can lead to disallowance and penalty. It is best to regularise any missed 194S deduction promptly.

They are separate. Section 115BBH taxes income from VDA transfers at a flat 30% (plus surcharge and cess), with no deduction other than cost of acquisition and no set-off or carry-forward of VDA losses. Section 194S is only a 1% tax deducted at source on the consideration — an advance collection, not the final tax. The TDS appears in your Form 26AS/AIS and is adjusted against the 30% liability when you file your ITR.

The 1% TDS under Section 194S is an income-tax credit, not a GST amount — it can never be claimed or refunded through GST returns. It is claimable only in your income-tax return: the deducted amount reflects in Form 26AS/AIS against your PAN, and you claim it as TDS credit in your ITR. If the credit exceeds your total income-tax liability (for example, you traded at a loss overall), the excess is refunded by the Income Tax Department after ITR processing.

No. Under Section 115BBH, losses from one VDA cannot be set off against gains from another VDA or any other income, and cannot be carried forward. The 1% 194S TDS is deducted on the sale consideration regardless of whether you made a profit or loss, so you can accumulate TDS credit even on loss-making trades — which is then refunded through your ITR.

Yes, in substance. The Income-tax Act 2025 replaced the 1961 Act from 1 April 2026 as part of the simplification exercise. The requirement to deduct 1% TDS on transfer of VDAs continues under the corresponding TDS provision of the new Act — the rate, thresholds (Rs50,000 for specified persons, Rs10,000 for others) and the buyer's obligation carry forward. "Section 194S" remains the common usage for periods before 1 April 2026 and in existing circulars.