TDS on Crypto for P2P Transactions in India 2026 –
Section 194S, Form 26QE, Buyer Obligations and VDA Compliance
TDS on crypto for P2P transactions is now a strict compliance in India. Section 194S imposes 1% TDS on every Virtual Digital Asset transfer — every buyer in a P2P crypto transaction must deduct, deposit, and report TDS on crypto correctly, with the Finance Act 2025 expanding the VDA definition from 1 April 2026.
Overview
What Is TDS on Crypto Under Section 194S?
TDS on crypto is the 1% tax deducted at source on every Virtual Digital Asset transfer. Section 194S of the Income Tax Act governs this deduction — every P2P crypto transaction in India has triggered this compliance from 1 July 2022 onwards. Section 194S imposes 1% TDS on gross sale consideration, while Section 115BBH separately taxes VDA gains at 30% plus surcharge and cess. The 1% TDS is a credit against the 30% final tax — both apply to every trade as two separate obligations.
Section 2(47A) defines Virtual Digital Asset broadly — covering cryptocurrencies, NFTs, and any notified digital asset. The Finance Act 2025 added sub-clause (d) explicitly covering "crypto-asset" from 1 April 2026, capturing stablecoins, tokens, and blockchain-based assets. TDS on crypto applies to every Virtual Digital Asset under this expanded scope.
Non-compliance with TDS on crypto attracts cascading consequences — Section 201(1A) interest of 1% per month (1.5% for late deposit), Section 234E fees of ₹200 per day, and Section 271C penalty up to the full unpaid TDS amount. Wilful default can trigger Section 276B prosecution with imprisonment from three months to seven years.
Buyer's Responsibility
P2P Crypto Transactions – Who Deducts TDS on Crypto?
P2P crypto transactions put the TDS responsibility squarely on the buyer. CBDT Circulars 13/2022 and 14/2022 clarified this position — every Indian buyer in a P2P crypto transaction must deduct 1% TDS before paying the seller. The buyer deducts at the time of credit or payment, whichever is earlier, verifies the seller's PAN, deposits the TDS within 30 days, and the seller receives only the net 99% of the consideration.
| Transaction Type | Who Deducts TDS | Form to File | Threshold |
|---|---|---|---|
| P2P (buyer ↔ seller) | Buyer deducts 1% TDS | Form 26QE (specified) / Form 26Q (others) | ₹50K (specified) / ₹10K (others) |
| Indian exchange (exchange owns VDA) | Exchange deducts 1% TDS | Form 26QF (quarterly) | Same as above |
| Indian exchange (platform only) | Exchange deducts on behalf of buyer | Form 26QF / 26Q | Same as above |
| Crypto-to-crypto swap | Both parties deduct 1% TDS each | Form 26QE / 26Q by each | Same as above |
| Foreign exchange / foreign seller | Indian buyer deducts under Section 195 | Form 27Q (non-resident TDS) | No threshold for Sec 195 |
Individual / HUF With Limits
A "specified person" is an individual or HUF without business income, or with business turnover up to ₹1 crore (or ₹50 lakh for professionals). Specified persons use the higher ₹50,000 annual threshold, do not need a TAN, and file Form 26QE — a challan-cum-statement.
Businesses With TAN
All other buyers — companies, LLPs, businesses above the specified-person limits — use the lower ₹10,000 annual threshold and file Form 26Q quarterly through their TAN. Their monthly deposit mechanics are the same as every other non-salary TDS.
Rate Mechanics
1% TDS Thresholds and Rate Mechanics
The 1% TDS rate applies uniformly across every Virtual Digital Asset transfer — to gross consideration, not to profit. Even loss-making trades trigger the 1% TDS deduction. The threshold is tested per financial year, not per transaction; once crossed, every subsequent P2P crypto transaction attracts the 1% TDS.
Per financial year threshold for specified persons (individuals / HUFs within the business-income limits). Tested cumulatively — not per transaction. Crossing the threshold triggers TDS on every subsequent P2P crypto trade in that year.
Lower annual threshold for every other buyer — companies, LLPs, businesses above specified-person limits. Same per-financial-year test. Once crossed, 1% TDS applies on every subsequent trade regardless of amount.
Section 206AA jumps the TDS rate to 20% when the seller lacks PAN or quotes an invalid PAN. Applies even for non-Indian sellers. Our PAN Registration team ensures seller-PAN verification before every payment.
Each party acts as both buyer and seller of different VDAs. Each party deducts 1% TDS on the fair market value of the asset received. Proof of tax deposit must be shared before the swap completes. Doubles the compliance of a pure P2P transaction.
Compliance Workflow
P2P Buyer's 4-Step Compliance Flow
The P2P buyer follows a clear four-step workflow for TDS on crypto — deduction, deposit, filing, and certificate issuance. Every P2P crypto transaction must complete all four steps within prescribed timelines. Missing any step triggers interest, late fees, and penalty.
Deduct at Payment / Credit — 1% (20% if No PAN)
Deposit Within 30 Days of Month-End
File Form 26QE (Specified) or Form 26Q (Others)
Issue Form 16E TDS Certificate Within 15 Days
Non-Compliance
Interest, Late Fees, and Penalties
Every default in TDS on crypto attracts cascading consequences — interest, late fees, and penalty. Every P2P crypto transaction demands on-time compliance. Every late deduction can still be remedied through delayed payment with interest, but the financial exposure grows quickly.
Interest for late deduction runs from the date deduction should have been made until it is actually made. Even a one-day delay attracts a full month's interest.
Higher rate for late deposit after deduction. Runs from deduction date to actual deposit date. Our TDS Return Filing team tracks every crypto TDS deposit deadline.
Late fee for Form 26QE or Form 26Q filing — ₹200 per day, capped at the TDS amount. Applies independent of Section 201(1A) interest.
Penalty up to the full amount of TDS not deducted or deposited. Section 276B separately triggers prosecution for wilful default — 3 months to 7 years imprisonment. Our Income Tax Notice team handles every default.
Wider Ecosystem
TDS on Crypto in the Wider Tax Framework
TDS on crypto is one piece of a larger crypto tax India framework. It interacts with Section 115BBH, Schedule VDA in ITRs, and AIS reporting. Every P2P crypto transaction needs end-to-end planning — not just TDS compliance.
Interplay With Section 115BBH 30% Tax
Schedule VDA in ITR-2 and ITR-3
Foreign Exchanges, Section 195 and Schedule FA
Our Services
Complete TDS on Crypto Services
N D Savla & Associates provides end-to-end TDS on crypto compliance services across India. We cover individual investors, HUFs, traders, startups, and exchanges — from the first P2P crypto transaction through Form 16E issuance, Schedule VDA reconciliation, and default notice defence.
Specified-Person Analysis and P2P TDS Deduction Advisory
Form 26QE Filing for Specified Persons
Form 26Q Quarterly Filing and Form 16E Issuance
115BBH Reconciliation, Schedule VDA and Notice Defence
Paying a Seller in a P2P Crypto Transaction? Deduct 1% TDS Before You Pay.
Section 194S advisory • Specified-person analysis • Form 26QE filing (specified) • Form 26Q quarterly filing (TAN holders) • Form 16E certificate issuance • Crypto-to-crypto swap compliance • 115BBH reconciliation • Schedule VDA • Notice defence.
+91 98190 00511 | +91 91670 58000 | +91 98190 00445 | nainitsavla@savlagroup.in | natasha@savlagroup.in
Contact UsF.A.Q.
In every P2P crypto transaction, the buyer deducts 1% TDS. Specifically, CBDT Circulars 13/2022 and 14/2022 placed the responsibility squarely on the person paying consideration. Additionally, the buyer deducts TDS at the time of credit or payment, whichever is earlier. Furthermore, if the buyer is a “specified person”, they file Form 26QE without needing a TAN. Therefore, every Indian buyer in a P2P crypto transaction must deduct, deposit, and report TDS on crypto.
The threshold depends on whether the buyer is a “specified person”. Specifically, specified persons face a ₹50,000 per-year threshold. Additionally, all other buyers face a lower ₹10,000 per-year threshold. Furthermore, the threshold applies per financial year — not per transaction. Moreover, once the threshold is crossed, every subsequent P2P crypto transaction attracts the 1% TDS.
A specified person under Section 194S is an individual or HUF with limited business income. Specifically, individuals or HUFs without business/professional income qualify. Additionally, those with business turnover up to ₹1 crore in the preceding year qualify. Furthermore, professionals with gross receipts up to ₹50 lakh also qualify. Moreover, specified persons enjoy the higher ₹50,000 threshold and file Form 26QE.
Specified persons file Form 26QE — a challan-cum-statement. Specifically, it combines TDS deposit and statement filing in a single form. Additionally, the deadline is 30 days from the month-end of deduction. Furthermore, other deductors file Form 26Q quarterly through their TAN. Moreover, Form 16E TDS certificate must be issued to the seller within 15 days of the challan due date.
Yes. The 1% TDS on crypto applies on gross consideration — not profit. Specifically, even loss-making P2P crypto transactions attract the 1% deduction. Additionally, the seller claims TDS credit in the ITR. Furthermore, excess TDS becomes refundable where 30% Section 115BBH tax is lower. Therefore, TDS on crypto remains payable regardless of transaction outcome.
Crypto-to-crypto swaps trigger TDS on crypto on both sides. Specifically, each party acts as both buyer and seller of different Virtual Digital Assets. Additionally, each deducts 1% TDS on the fair market value of the asset received. Furthermore, proof of tax deposit must be shared before the swap completes. Moreover, both parties report the transaction in Form 26QE or Form 26Q.
Missing TDS on crypto attracts multiple penalties. Specifically, Section 201(1A) charges 1% interest per month for late deduction and 1.5% for late deposit. Additionally, Section 234E imposes ₹200 per day for late Form 26QE filing. Furthermore, Section 271C imposes penalty up to the full unpaid TDS. Moreover, our Income Tax Notice team handles every crypto-TDS default notice.
