Section 194S — 1% TDS on Crypto
& Virtual Digital Assets
How much TDS applies on the transfer of a Virtual Digital Asset, the two thresholds, who deducts on an exchange vs a P2P trade, how it links to the flat 30% crypto tax, and how you claim the credit.
Section 194S requires the buyer to deduct 1% TDS on the consideration paid for transfer of a Virtual Digital Asset (VDA) — cryptocurrencies and NFTs — effective 1 July 2022. The threshold is Rs50,000 a year for a specified person (individual/HUF below the tax-audit limits or with no business income) and Rs10,000 for everyone else. On an Indian exchange the exchange deducts; in a P2P trade the buyer must deduct. This 1% is only an advance credit adjustable against the flat 30% crypto tax under Section 115BBH. Rate and thresholds are unchanged for FY 2025-26.
Section 194S — Applicability
Every condition that decides whether 194S bites, at what rate, and from when.
| Condition | Requirement |
|---|---|
| What is covered | Transfer of any Virtual Digital Asset — crypto (Bitcoin, Ethereum, USDT, etc.) and NFTs |
| Who deducts | Buyer (person paying); Indian exchanges deduct on the buyer’s behalf per CBDT Circular 13/2022 |
| Rate | 1% of consideration 20% if seller’s PAN not furnished (206AA) |
| Threshold — specified person | Rs50,000 aggregate/year (individual/HUF: turnover ≤ Rs1 crore or professional receipts ≤ Rs50 lakh in preceding FY, or no business income) |
| Threshold — others | Rs10,000 aggregate/year |
| Timing | At credit or payment, whichever is earlier |
| Crypto-to-crypto swap | TDS on both legs — each party is a buyer of the VDA it receives |
| Effective date | 1 July 2022 (Finance Act 2022); continues under the Income-tax Act 2025 from 1 April 2026 |
Budget 2025 did not change 194S — the 1% rate and both thresholds continue for FY 2025-26 / AY 2026-27.
If the seller has not furnished PAN, TDS is deducted at 20% under Section 206AA — twenty times the normal rate. Swaps are also caught: because both sides receive a VDA, 1% is deducted on each leg, so a crypto-to-crypto trade carries TDS twice.
Who Deducts — Exchange vs P2P
The statutory obligation is always on the buyer, but CBDT Circular 13/2022 lets the mechanics shift to the platform.
On an Indian exchange individual buyers need do nothing — the exchange handles deduction and deposit. In a peer-to-peer wallet-to-wallet sale, an OTC deal, or a purchase on a foreign platform that does not handle Indian TDS, the buyer is fully responsible.
Trading P2P or on a foreign exchange? Get your 194S deduction and deposit handled correctly.
Talk to a TDS Expert →How to Deposit — Form 26QE vs Form 26Q
| Deductor | TAN? | Deposit / statement | Certificate |
|---|---|---|---|
| Specified person (individual/HUF below audit limits) | No — PAN | Form 26QE (challan-cum-statement) within 30 days from end of the month of deduction | Form 16E to seller |
| Others (companies, firms, exchanges) | Yes | Deposit by the 7th of the following month; report in quarterly Form 26Q | Form 16A to seller |
Late deduction/deposit attracts interest; delayed Form 26QE filing attracts a late fee under Section 234E.
Section 194S vs Section 115BBH
The 1% TDS is not the crypto tax. Section 115BBH taxes gains from VDA transfers at a flat 30% (plus surcharge and cess), allows no deduction except cost of acquisition, and permits no set-off or carry-forward of VDA losses — not even against other crypto gains. Section 194S only collects 1% of the sale consideration in advance.
Section 194S (TDS)
- On the sale consideration, not the gain
- Deducted at source by exchange or buyer
- Only an advance credit
- Shows in Form 26AS / AIS
- Excess is refunded via your ITR
Section 115BBH (final tax)
- On the net gain from VDA transfer
- Flat 30% + surcharge + cess
- No deduction except cost of acquisition
- No set-off / carry-forward of losses
- This is the actual tax you owe
The 194S credit is an income-tax amount — it can never be claimed or refunded through GST. If your total 194S credit exceeds your final 30% liability (for example, you traded at a loss overall), the excess is refunded by the Income Tax Department after your ITR is processed.
Continuity under the Income-tax Act 2025
The Income-tax Act 2025 replaced the 1961 Act from 1 April 2026. The 1% TDS on VDA transfers continues under the corresponding TDS provision of the new Act with the same rate and thresholds — only the numbering scheme changed. Existing CBDT circulars and the 26QE/26Q framework carry forward in substance, and “Section 194S” remains the term used for deductions relating to periods before 1 April 2026.
Section 194S — Frequently Asked Questions
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Our CA team handles Section 194S end-to-end — Form 26QE/26Q filing for P2P and exchange trades, TDS credit reconciliation with Form 26AS, and crypto ITR reporting under Section 115BBH. 100% online, across India.