1% TDS on Crypto Transactions in India Explained: What You Need to Know in 2025

When you buy, sell, or trade crypto in India, a 1% tax is automatically taken out of your transaction. It’s not optional. It’s not a suggestion. It’s 1% TDS on crypto transactions - a rule that’s been in place since July 1, 2022, and it’s changed how millions of people trade digital assets. If you’ve noticed less money landing in your wallet after a trade, or if your exchange app suddenly started showing a deduction you didn’t ask for, this is why.

What Exactly Is 1% TDS on Crypto?

TDS stands for Tax Deducted at Source. In simple terms, it means someone - usually the exchange or platform you’re using - takes 1% of your transaction value right when the trade happens and pays it directly to the government. You don’t get to decide whether to pay it. It’s automatic.

This rule applies to any transfer of a virtual digital asset (VDA), which includes Bitcoin, Ethereum, Solana, or any other crypto. It covers sales, trades (like swapping BTC for ETH), and even spending crypto to buy goods or services. But here’s what it doesn’t cover: moving crypto from your wallet to another wallet you own. If you’re just shifting coins between your own accounts, no TDS is taken.

The tax is calculated on the total value of the transaction in Indian rupees. So if you sell 0.5 BTC for ₹500,000, ₹5,000 (1%) is deducted as TDS. That amount shows up in your Form 26AS, which is your official tax record with the Income Tax Department.

Who Pays the 1%? And When Does It Apply?

The rules aren’t the same for everyone. There are two different thresholds based on your tax status.

• If you’re an individual or Hindu Undivided Family (HUF) who doesn’t need to get audited for income tax, TDS kicks in only if your total crypto transactions in a financial year (April 1 to March 31) exceed ₹50,000.
• If you’re a company, or an individual who’s already subject to tax audit (usually high-income earners or business owners), the threshold drops to just ₹10,000 per year.

That means if you’re a regular person trading crypto on the side and your total trades this year are ₹45,000, you won’t pay any TDS. But if you hit ₹50,001, every single transaction from that point forward will have 1% deducted - not just the amount over the limit.

And here’s something most people miss: in a crypto-to-crypto trade, both sides pay TDS. If you swap 1 ETH for 20 BTC, you pay 1% TDS on the value of the ETH you gave up, and the person you traded with pays 1% on the value of the BTC they gave you. That’s a 2% total tax burden on the same trade.

What Happens If You Trade on P2P or Overseas Platforms?

Indian exchanges like WazirX, CoinDCX, and ZebPay handle TDS automatically. But if you’re using a non-Indian exchange like Binance or Kraken, or trading peer-to-peer (P2P) with someone in India, the responsibility shifts to you.

As the buyer, you’re legally required to deduct 1% TDS from the payment you send to the seller. You also need to get their Permanent Account Number (PAN), file Form 26QE monthly, and issue a TDS certificate within 15 days. Most people don’t do this. And that’s a problem.

The Income Tax Department can track these transactions. If you’re caught not deducting TDS on a P2P trade, you could be fined up to 100% of the tax amount you should’ve paid. Plus, you’ll still owe the original 1%. It’s not worth the risk.

What About Crypto Losses? Can I Offset Them?

No. And this is where the system gets frustrating.

India has a flat 30% tax on crypto gains, with no deductions allowed for losses. That means if you bought Bitcoin at ₹40 lakh and sold it at ₹30 lakh, you still owe 30% tax on the ₹30 lakh - even though you lost ₹10 lakh. The 1% TDS doesn’t change that. You pay TDS on every sale, regardless of profit or loss.

There’s no way to carry forward losses to future years. No offsetting against salary or business income. This makes crypto trading in India fundamentally different from how stocks or real estate are taxed. You’re taxed on volume, not profit.

How Does This Compare to Other Countries?

India’s approach is unusual. Most countries don’t tax every single trade. In the U.S., you only pay capital gains tax when you sell for a profit - and rates depend on how long you held the asset. Germany lets you hold crypto tax-free after one year. Singapore doesn’t tax crypto gains at all.

India is one of the few countries that applies TDS to crypto-to-crypto trades. The European Union’s MiCA rules only tax when you convert crypto to fiat. India taxes the swap itself. That’s a big difference.

And now, on top of TDS, there’s also GST. Since July 1, 2025, Indian crypto exchanges must charge 18% GST on their service fees. So if you trade ₹2.5 lakh worth of crypto and pay ₹1,000 in trading fees, you pay ₹2,500 in TDS plus ₹180 in GST. That’s ₹2,680 in taxes on a single trade.

What Are the Real-World Effects?

The policy has had clear consequences.

India’s crypto user base dropped from 15 million in early 2022 to 10.2 million by the end of 2022. It’s since recovered slightly to 11.7 million as of mid-2025 - but many of the people who left were active traders. A WazirX study found that day traders doing 100 small trades a month lost 10% of their trading capital annually just to TDS.

On Reddit and Twitter, users complain about confusion. Many thought the ₹50,000 limit applied per transaction, not per year. Others got hit with double TDS when CoinSwitch Kuber had a glitch in 2023 that incorrectly charged two deductions on 15,300 trades. Refunds took months.

But the government says it’s working. TDS collections hit ₹1,852 crore in FY 2023-24 - 27% higher than expected. The number of reported crypto transactions jumped 43% after TDS was introduced. That’s the whole point: visibility. The government now has a clear trail of who’s trading what, and how much.

What Should You Do Now?

If you’re using an Indian exchange: you’re covered. TDS is automatic. Just check your Form 26AS every few months to make sure the deductions match your trades. It can take 7-10 days to appear.

If you’re trading on P2P or overseas platforms: start keeping records. Save every transaction receipt, timestamp, counterparty PAN, and amount. Use a crypto tax app like Koinly or CoinTracker to track your TDS liability. File Form 26QE on time - monthly, not annually.

If you’re a high-frequency trader: consider reducing the number of small trades. Each ₹10,000 trade costs you ₹100 in TDS. Do 100 of those a month? That’s ₹10,000 gone in a year - not from profit, just from moving money around.

If you’re a beginner: understand the thresholds. Stay under ₹50,000 in annual trades if you can. It’s legal. It’s smart. You won’t owe TDS. You’ll still be taxed on gains later, but at least you won’t be bleeding money on every trade.

What’s Next for Crypto Tax in India?

The government isn’t done. The proposed Digital Asset Bill 2025 could replace TDS with a centralized registry that tracks every crypto transaction in real time. That would make TDS obsolete - but also make privacy nearly impossible.

There are also rumors the ₹50,000 threshold for individuals might rise to ₹1,00,000 in the 2025-26 budget. That’s being pushed by industry groups and 142 stakeholder consultations. But nothing’s confirmed yet.

Meanwhile, NPCI - India’s national payments system - is testing a pilot that will auto-report crypto transactions to tax authorities through the Account Aggregation Framework. That means even if you don’t file anything, the government might still know what you did.

The message is clear: crypto is not going away. But it’s no longer anonymous. If you’re trading in India, you’re being watched - and taxed - at every step.