TDS on Crypto Transactions No Relief in Budget 2025
During the Select Committee discussions on the Income Tax Bill, 2025, a key demand was raised by crypto exchanges and investors—reduce the 1% TDS on crypto transactions under Section 194S. But the Central Government has officially rejected this proposal, making it clear that tax tracking takes precedence over trade volume for now.
Let’s decode what this means for Indian investors, platforms, and tax professionals.
What is Section 194S TDS on Crypto?
Section 194S was introduced in Budget 2022 to bring crypto and virtual digital assets (VDAs) under the tax net. It requires:
- 1% TDS on the transfer of VDAs, such as Bitcoin, Ethereum, NFTs, etc.
- Applies even if there’s a loss or zero profit
- Applies on transactions above ₹10,000 per year (or ₹50,000 for specified persons)
- Effective from 1 July 2022
The deducted TDS must be deposited to the government and reported in Form 26Q or 26QE.
What Did the Crypto Industry Demand?
During stakeholder consultations for the Income Tax Bill, 2025, industry players argued that:
- 1% TDS discourages liquidity, especially for small investors
- Frequent trades suffer due to capital getting blocked
- Exchanges face compliance hurdles, especially in P2P or cross-platform transfers
- Lowering it to 0.01% or 0.05% was proposed to ease market participation
Why Did the Government Reject It?
According to official sources quoted in parliamentary records:
- TDS is not a revenue tool, but a tracking mechanism
- Crypto remains a high-risk asset class with money laundering concerns
- The current regime helps monitor trades and trace unreported income
- Reduction could weaken tax enforcement in a largely unregulated space
So, the Finance Ministry stood its ground: no reduction in TDS for now.
Impact on Indian Crypto Investors
Here’s what this means for retail traders and platforms:
| Aspect | Current Rule (2025) | Impact |
|---|---|---|
| TDS Rate on Crypto | 1% under Sec 194S | No change |
| Minimum Threshold | ₹10,000 (₹50,000 for small users) | Same |
| Trading Frequency | Frequent trades = more blocked capital | Remains a bottleneck |
| Reporting Requirements | TDS return filing (Form 26Q/26QE) | Still mandatory |
| Crypto Losses | Not adjustable | Still taxable on gross value |
Expert Tip: How to Manage TDS Impact
Chartered Accountants recommend the following:
- Track TDS credits in Form 26AS and AIS
- Reconcile with crypto exchange statements quarterly
- File ITR using Schedule VDA to report crypto trades accurately
- If you’re a frequent trader, consider shifting to a structure like LLP or company to optimise tax load
Legal Reference
- Section 194S, Income-tax Act, 1961
- CBDT Guidelines dated 22 June 2022 clarifying applicability
- Budget 2022 Speech – VDA tax proposal
- Parliamentary discussions on the Income-tax Bill, 2025 (Select Committee proceedings)
Will This Policy Ever Change?
Only if:
- The industry becomes well-regulated under RBI or SEBI
- The government sees reliable self-reporting mechanisms
- TDS data proves to be ineffective for tax detection (unlikely)
For now, Section 194S remains a compliance-first tool rather than a revenue instrument.
FAQ: Crypto TDS in India
Q1. Can I claim refund of crypto TDS?
Yes, if your total tax liability is less than the TDS deducted, you can claim a refund via ITR.
Q2. Does TDS apply on gifting crypto?
Yes, if it qualifies as a ‘transfer’ under Section 194S and crosses the threshold.
Q3. Are international exchanges covered?
TDS compliance is on the payer. If the buyer is in India, Section 194S applies even for international platforms.
Conclusion
The government’s refusal to reduce TDS on crypto transactions signals one thing: compliance over convenience. Until a regulatory framework for VDAs is in place, crypto will continue to face tight tax scrutiny.
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Summary
TDS on crypto transactions under Section 194S stays at 1%, as the Centre rejects proposals to reduce it during the Income Tax Bill, 2025 review. The government views it as a tracking tool, not a tax burden. Indian investors must comply or face penalties. Efiletax can help simplify crypto tax filing.