Key takeaways
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Crypto trades in India now leave a clear tax trail. Section 194S puts a 1% TDS layer on many VDA transfers, and that TDS often shows up in your Form 26AS and AIS. For AY 2026–27 (income earned in FY 2025–26), your job stays simple in theory: report VDA income correctly, then claim only the TDS credit that actually reflects in the tax system.
This guide explains the 194S threshold limit crypto rules, who deducts TDS on crypto in different setups, and how to claim the 194S credit in your ITR without creating avoidable mismatches.
Section 194S and what it covers for crypto
Section 194S applies to transfers of virtual digital assets (VDAs). In day-to-day terms, it targets many common crypto actions that look like a “transfer for consideration,” such as selling crypto for INR or swapping one coin for another on a platform that can run TDS processes.
The law sets the TDS rate at 1% on the consideration. It triggers at the time of credit or payment, whichever happens first.
When people say crypto tds 194s or tds on vda section 194s, they usually mean this 1% layer that shows up in tax credits and sometimes reduces cash available for trading.
What is section 194S in crypto tax
Think of 194S as a tracking mechanism that also collects a small amount of tax upfront. It does not replace your final tax under 115BBH. It also does not calculate your profit. You still compute gains and report them in Schedule VDA, then you claim eligible TDS credit based on what reflects in your tax records.
194S threshold limit crypto: when 1% TDS applies
The threshold depends on who pays the consideration.
Circular guidance sets two key limits for the year:
- ₹50,000 when a “specified person” pays the consideration
- ₹10,000 when any other person pays the consideration
A “specified person” broadly covers many retail users, including individuals/HUFs without business income and some individuals/HUFs with business income under turnover limits.
Quick threshold table
| Payer type (for 194S) | Typical threshold in FY | When 1% TDS starts |
|---|---|---|
| Specified person (many retail individuals/HUFs) | ₹50,000 | After aggregate consideration crosses ₹50,000 |
| Other payers | ₹10,000 | After aggregate consideration crosses ₹10000 |
Example: threshold crossing in a normal year
You buy and sell crypto a few times on an exchange. Once your sales consideration crosses the relevant threshold for the payer side, the system starts deducting 1% TDS on applicable transfers. You may see TDS on later sales even if earlier sales had no deduction.
Who deducts TDS on crypto: exchange, broker, P2P, OTC
This part creates the most confusion because the “person responsible for paying” changes with the transaction structure.
Circular guidance lays out how TDS duties can move between the exchange, broker, and buyer, especially for trades that take place “on or through an Exchange.”
When you trade on an exchange
On many exchanges, the exchange can deduct 194S when it credits or pays the seller, especially when the VDA belongs to someone other than the exchange. In broker-routed setups, the exchange and broker can share responsibility unless they sign an agreement that places deduction duty on one party.
In practical terms, most retail users experience 194S as an automatic deduction on sales and some swaps, with a contract note or trade confirmation that shows the withheld amount.
When you do P2P deals
For P2P transfers that do not go through an exchange mechanism covered by the exchange guidelines, the buyer typically carries the 194S duty because the buyer pays the consideration directly to the seller.
That detail matters when you sell crypto directly to another person for INR. If the buyer does not deduct and deposit TDS, you may not see a corresponding TDS entry in 26AS even though the transaction happened.
When you do OTC or off-platform deals
OTC deals often behave like P2P from a compliance perspective. The party paying the consideration should evaluate 194S duty and follow deposit and reporting steps. The deductor reports 194S through one of these forms:
- Form 26Q applies to exchanges and other deductors that do not qualify as specified persons, and it captures quarterly TDS reporting details.
- Form 26QE is designed for specified persons in non-exchange scenarios as a challan-cum-statement for 194S.
When consideration is in crypto: swaps and in-kind transfers
Crypto rarely stays in INR-only lanes. Users swap ETH for USDT, swap SOL for another token, or pay in crypto for something else. 194S still looks at “consideration,” even when it comes in kind or through another VDA.
Circular guidance covers the in-kind problem directly: if cash does not cover the TDS amount, the payer must ensure payment of the tax before releasing the in-kind consideration.
Example: swap (ETH to USDT)
You swap ₹1,00,000 worth of ETH into USDT.
- The system treats it as a transfer where consideration comes as another VDA.
- 1% TDS typically equals ₹1,000 on the consideration side that triggers deduction.
- If an exchange runs an alternative mechanism, it can deduct TDS in the traded pair, convert it to a primary VDA, then convert to INR for deposit, while keeping a full trail and timestamps.
This is why users often see multiple small TDS deductions in high-frequency swap months.
How to check crypto TDS deducted in Form 26AS and AIS
If you want a clean filing, start by checking what the tax system already shows under your PAN.
Form 26AS: your core TDS credit statement
The Income Tax Department lists steps to view Form 26AS through the e-filing portal, then redirects you to the TDS-CPC portal, where you can view or download the statement.
Use 26AS as the “credit truth” for most ITR workflows, because the portal also states that the tax credit you claim in your ITR can get restricted to what reflects in 26AS.
AIS: a wider transaction view
AIS can show more than just TDS credits. It can help you spot reported crypto-related activity that may not map cleanly to your own ledger. Use it as a cross-check, not as your profit calculator.
A practical reconciliation habit that saves time
Keep three sets of records aligned:
- Your trade ledger (all buys, sells, swaps, fees, wallet moves)
- Your exchange contract notes/statements for the year
- Form 26AS and AIS for the year
When any one of these differs from the other two, you can usually isolate the problem quickly.
How to claim 194S TDS credit in ITR for AY 2026–27
Claiming credit means entering TDS details in the right place and matching them to what 26AS reflects.
The Income Tax portal’s ITR-2 online filing manual shows that the return flow includes Schedule VDA and a Tax Paid section where you verify TDS details (salary and non-salary), TCS, advance tax, and self-assessment tax.
How to claim 194S TDS credit in ITR
Use this sequence:
- Collect TDS proof: contract notes, exchange tax statements, and 26AS download.
- Fill Schedule VDA with your crypto disposals and the income figure that flows into total income computation.
- Enter TDS in the relevant “Tax Paid / Schedule TDS” area using details that match 26AS (deductor, amounts, and year mapping).
- Cross-check credits: if you claim more than 26AS shows, the portal can restrict the credit.
- Fix mismatches early: when you see a TDS mismatch, the portal FAQ asks you to contact the deductor to revise the TDS return, or use revised return or rectification routes depending on your situation.
Mini example: credit mismatch in real life
You see ₹12,500 as “TDS deducted” in exchange statements across the year. Form 26AS shows ₹10,800 today.
If you claim ₹12,500 in the ITR, the system can restrict the credit to ₹10,800.If the missing ₹1,700 comes from a late or incorrect TDS filing by the deductor, you need the deductor to correct their statement so 26AS updates.
TDS deducted but crypto loss: what to do
People often ask: is 1% tds applicable on crypto loss?
Yes, it can apply, because 194S works on consideration for transfer, not on profit after cost. Circular language ties TDS to consideration thresholds and timing, not gain outcomes.
A quick loss example
You buy a token for ₹50,000. You sell it for ₹40,000.
- You book a loss on the sale.
- 194S can still deduct ₹400 (1% of ₹40,000) if you crossed the threshold and the structure triggers deduction.
Later, while filing your ITR, you still report the VDA outcome correctly in Schedule VDA. You also claim TDS credit based on 26AS, even though the trade produced a loss.
Crypto TDS refund process India
When your total tax liability falls below the total credits (TDS, advance tax, self-assessment tax), you can get a refund through normal ITR processing. The key step stays the same: claim only what reflects correctly in tax credit statements and fix deduction errors early.
Keeping your crypto records ready with cryptact
TDS credit claiming works best when your underlying trade records stay clean. Many users trade across multiple exchanges, use multiple wallets, and move funds between them. That setup creates gaps when you rely on screenshots or partial CSVs at year-end.
cryptact helps you build a unified portfolio and tax-ready ledger by:
- Consolidating trades and wallet activity across exchanges and wallets into one view
- Tracking taxable disposals and cost details so your Schedule VDA reporting stays consistent
- Producing clear transaction histories and reports you can use while reconciling your own records with Form 26AS and AIS
This approach keeps you in control. You do not need guesswork when you reconcile disposals, consideration amounts, and the TDS entries you see under your PAN.
Conclusion
Section 194S affects crypto users in a simple way: it takes 1% TDS on many VDA transfers once you cross the threshold, and it leaves a visible trail in Form 26AS and AIS. You still compute your actual VDA income separately, then claim only the TDS credit that reflects correctly in your tax credit statements.
If you keep a clean ledger through the year, you can file faster and avoid avoidable mismatches. cryptact supports that workflow by consolidating multi-exchange and multi-wallet activity into one tax-ready record set, so you can report confidently and reconcile credits without scrambling in July.
