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

Updated: 16 July 2026 | Effective 1 July 2022 | Income-tax Act 1961 (continues under ITA 2025)

Section 194S requires the buyer to deduct TDS at 1% on the consideration paid for transfer of a Virtual Digital Asset (VDA) — cryptocurrencies and NFTs — effective 1 July 2022. Thresholds: ₹50,000 per year for specified persons (individuals/HUF below tax-audit turnover limits or with no business income) and ₹10,000 for everyone else. On Indian exchanges the exchange deducts; in P2P trades the buyer must deduct. This 1% is an income-tax credit adjustable against the flat 30% crypto tax under Section 115BBH.

TDS rate under Sec 194S = 1% of the consideration for transfer of any Virtual Digital Asset.
Rate becomes 20% if the seller has not furnished PAN (Section 206AA). TDS applies even on crypto-to-crypto swaps — on both legs.

Section 194S — Applicability Conditions

Condition	Requirement
What is covered	Transfer of any Virtual Digital Asset — cryptocurrencies (Bitcoin, Ethereum, USDT etc.) and NFTs
Who deducts	Buyer (person paying consideration); Indian exchanges deduct on the buyer's behalf per CBDT Circular 13/2022
Rate	1% of consideration (20% if seller's PAN not furnished)
Threshold — specified person	₹50,000 aggregate per financial year (individual/HUF with business turnover ≤ ₹1 crore or professional receipts ≤ ₹50 lakh in preceding FY, or no business/profession income)
Threshold — others	₹10,000 aggregate per financial year
Timing	At credit or payment, whichever is earlier
Crypto-to-crypto swap	TDS applies 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

Who Deducts — Exchange Trades vs P2P Trades

Although the statutory obligation is on the buyer, CBDT Circular 13/2022 allows the mechanics to shift to the platform: when a VDA is traded through an Indian exchange, the exchange deducts the 1% TDS at the time of trade and deposits it against the seller's PAN, so individual buyers need not do anything. In a peer-to-peer (P2P) transfer — a direct wallet-to-wallet sale, an OTC deal, or a purchase on a foreign platform that does not handle Indian TDS — the buyer must personally deduct 1%, deposit it, and file the applicable statement. Where consideration is wholly in kind (as in swaps), the person responsible must ensure the tax has been paid before releasing the asset.

How to Deposit — Form 26QE vs Form 26Q

Deductor Type	TAN Needed?	Deposit / Statement	TDS Certificate
Specified person (individual/HUF below audit limits)	No — PAN is enough	Form 26QE (challan-cum-statement) within 30 days from end of month of deduction	Form 16E to the seller
Other deductors (companies, firms, exchanges)	Yes	Deposit by 7th of following month; report in quarterly Form 26Q return	Form 16A to the seller

The seller sees the deducted amount in Form 26AS / AIS and claims it as TDS credit in their ITR. Late deduction or deposit attracts interest, and delayed Form 26QE filing attracts late fees under Section 234E.

Section 194S vs Section 115BBH — TDS Is Not the Final Tax

Do not confuse the 1% TDS with the crypto tax itself. Section 115BBH taxes gains from VDA transfers at a flat 30% (plus surcharge and cess), allows no deduction other than cost of acquisition, and permits no set-off or carry-forward of VDA losses — even against other crypto gains. Section 194S merely collects 1% of the sale consideration in advance. When you file your ITR, the 194S credit in your Form 26AS is adjusted against the 30% liability; if your credit exceeds the final tax (for instance, you sold at a loss), the excess is refunded through the income-tax return — never through GST. See our full guide on crypto taxation in India.

Continuity Under the Income-tax Act 2025

The Income-tax Act 2025 replaced the Income-tax Act 1961 with effect from 1 April 2026. The 1% TDS on transfer of Virtual Digital Assets continues under the corresponding TDS provision of the new Act with the same rate and thresholds — only the section numbering scheme has changed. Existing CBDT circulars and the compliance forms framework carry forward in substance, and "Section 194S" remains the term used for deductions relating to periods before 1 April 2026.

Frequently Asked Questions

What is Section 194S and when did it come into effect?

Section 194S of the Income-tax Act, 1961 requires the buyer (person paying consideration) to deduct TDS at 1% on the transfer of a Virtual Digital Asset (VDA) — cryptocurrencies like Bitcoin and Ethereum, and NFTs. It was introduced by the Finance Act 2022 and is effective from 1 July 2022. TDS is deducted at the time of credit or payment, whichever is earlier. The Income-tax Act 2025 has replaced the 1961 Act from 1 April 2026, and the same 1% TDS requirement on VDA transfers continues under the corresponding provision of the new Act.

What are the threshold limits for TDS under Section 194S?

Two thresholds apply per financial year: (1) ₹50,000 for a "specified person" — an individual or HUF whose business turnover was ≤ ₹1 crore or professional gross receipts were ≤ ₹50 lakh in the preceding financial year, or an individual/HUF with no income from business or profession; (2) ₹10,000 for all other deductors (companies, firms, individuals/HUF above the audit limits). The threshold is aggregate consideration paid to a seller during the financial year — once crossed, TDS applies at 1% on the amount paid.

Who deducts TDS on crypto — the buyer or the exchange?

The legal obligation is on the buyer (person paying the consideration). In practice, when you trade through an Indian crypto exchange, the exchange deducts the 1% TDS on behalf of the buyer at the time of the trade and deposits it against the seller's PAN — this mechanism is clarified in CBDT Circular 13/2022. In peer-to-peer (P2P) trades where no exchange is involved, the buyer must personally deduct 1% TDS, deposit it, and file the applicable statement. On foreign exchanges that do not deduct Indian TDS, the Indian buyer remains responsible for compliance under Section 194S.

Does Section 194S apply to crypto-to-crypto swaps?

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 the consideration is in kind, each party must ensure tax has been paid in respect of the leg they are responsible for before releasing the asset — on Indian exchanges, the exchange typically handles this by deducting TDS (often in kind or from a cash component) on both sides of the trade.

How is TDS under Section 194S deposited — Form 26QE or Form 26Q?

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 TDS by the 7th of the following month, and report the deduction in the quarterly Form 26Q TDS return, issuing Form 16A to the seller.

How does Section 194S interact with the 30% crypto tax under Section 115BBH?

They are separate levies. 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 sale consideration — it is an advance collection, not the final tax. The TDS deducted appears in your Form 26AS/AIS and is adjusted against your final 30% liability when you file your ITR.

Can I get a refund of the 1% crypto TDS? Is it refundable through GST?

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 TDS 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.

Is Section 194S still applicable under the new Income-tax Act 2025?

Yes, in substance. The Income-tax Act 2025 replaced the Income-tax Act 1961 with effect from 1 April 2026 as part of the simplification exercise. The requirement to deduct 1% TDS on transfer of Virtual Digital Assets continues under the corresponding TDS provision of the new Act — the rate, thresholds (₹50,000 for specified persons, ₹10,000 for others) and the buyer's deduction obligation carry forward. References to "Section 194S" remain the common usage for the pre-2026 period and in existing circulars.

Crypto Tax in India (30%) TDS Return Filing TDS Rate Chart What is TDS? Section 194Q TDS Compliance

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