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The 2-Minute Summary
Section 393(1) Sl. No. 8(vi) requires TDS at 1% on every transfer of a Virtual Digital Asset (VDA). VDA includes cryptocurrencies, NFTs, and any other digital asset notified by the government.
The threshold differs based on who is paying. Section 393(4) Sl. No. 12 provides a higher threshold of Rs. 50,000 for a specified person (a smaller individual or HUF). For all others, the threshold is Rs. 10,000.
Note 6 to Sl. 8(vi) governs in-kind VDA exchanges where there is no cash component. Note 4 states this provision overrides the e-commerce TDS under Sl. 8(v) when both apply.
Example: Priya sells Ethereum on a crypto exchange. The exchange deducts TDS of 1% before crediting her proceeds.
Example: Arjun buys Bitcoin worth Rs. 2,00,000 from Rohit in a P2P trade. Arjun deducts TDS of 1% = Rs. 2,000 and deposits it via Form 26QE (no TAN required for specified persons).
Under Income Tax Act 1961: Section 194S of the Income Tax Act 1961. Now Section 393(1) Sl. No. 8(vi) of the Income Tax Act 2025.
At a Glance
| Item | Details |
| New Act Reference | Section 393(1), Sl. No. 8(vi) of Income Tax Act 2025 |
| Old Act Reference | Section 194S of Income Tax Act 1961 |
| Rate | 1% |
| Threshold for specified person | Rs. 50,000 aggregate (Section 393(4) Sl. No. 12(a)) |
| Threshold for others | Rs. 10,000 aggregate (Section 393(4) Sl. No. 12(b)) |
| Who is specified person | Individual or HUF: (i) with business turnover not exceeding Rs. 1 crore or professional receipts not exceeding Rs. 50 lakh in preceding Tax Year; or (ii) having no income under Profits and Gains of Business or Profession |
| Override | Note 4: where Sl. 8(v) and Sl. 8(vi) both apply, TDS only under Sl. 8(vi) |
| In-kind VDA | Note 6(a)(ii)/(iii): ensure TDS paid before releasing VDA |
| TAN required | Not for specified persons using Form 26QE (Section 397(1)(c)) |
Threshold: Section 393(4) Sl. No. 12
Section 393(4) Sl. No. 12 sets out the thresholds with precision:
Clause (a): Rs. 50,000 when payable by an individual or HUF (i) whose total sales, gross receipts or turnover from business does not exceed Rs. 1 crore or from profession does not exceed Rs. 50 lakh in the Tax Year immediately preceding the Tax Year of transfer; or (ii) not having any income under Profits and Gains of Business or Profession.
Clause (b): Rs. 10,000 when payable by any person other than the person referred to in clause (a).
Note 6(a) to Sl. 8(iv) and 8(vi) states:
- Sub-clause (ii): where the consideration is wholly in kind, and sub-clause (iii): where partly in kind and partly in cash but the cash portion is not sufficient to meet the TDS liability, the person responsible for paying shall ensure that the tax required to be deducted has been paid before releasing such consideration.
This covers the common scenario of swapping one cryptocurrency for another with no cash component. Even in a pure crypto-to-crypto swap, TDS must be paid before either party releases their VDA.
Example: Rohit exchanges Rs. 3 lakh of Bitcoin for Rs. 3 lakh of Ethereum with no cash. Before releasing the Ethereum, the provider must ensure TDS of Rs. 3,000 (1%) has been paid in cash.
Note 4 to Section 393(1) Table: in case of a transaction on which provisions of Sl. 8(v) (e-commerce) are applicable along with Sl. 8(vi) (VDA), irrespective of anything contained in Note 3, tax on such transaction shall be deducted only under Sl. 8(vi).
This means if a VDA is sold through an e-commerce-type platform, the 1% VDA TDS applies, not the 0.1% e-commerce TDS.
TAN Not Required for Specified Persons
Section 397(1)(c) of the Act states that TAN is not required for persons referred to in Section 393(4) Table Sl. No. 12(a) (the specified person category) in respect of transactions under Sl. 8(vi). These persons deposit TDS using Form 26QE with their PAN.
Practical Compliance Checklist
- If you trade on a crypto exchange: the exchange handles TDS at 1%. Check your Form 26AS after each withdrawal to confirm TDS is credited. Claim it in your ITR.
- If you do P2P crypto trades: you (the buyer) must deduct 1% TDS. If you are a specified person (turnover below thresholds or no business income), use Form 26QE. Others use Form 26Q.
- If you swap one VDA for another with no cash: ensure TDS is paid in cash before the exchange. Both parties should agree in advance on who pays the TDS.
- Even if TDS is deducted, you must separately pay 30% tax on VDA income when filing your ITR. TDS is just advance payment.
Crypto TDS at 1% on consideration means even loss-making traders pay TDS on gross sale proceeds. The provision is designed for tracking, not just for revenue. Every transaction creates a trail in Form 26AS. File your ITR correctly, declare all VDA income under Section 7126 of the Act, and claim all TDS credits.
