TDS on transfer of virtual digital asset (crypto / NFT)

Any person paying CONSIDERATION for the transfer of a VIRTUAL DIGITAL ASSET (cryptocurrency, NFT) to a resident must deduct TDS @ 1% on the gross consideration. The trigger threshold is ₹50,000 for a 'specified person' (small individual / HUF) and ₹10,000 for everyone else.

Key points

• §194S (introduced FA 2022) requires any person responsible for paying to a resident any sum by way of CONSIDERATION for the transfer of a VIRTUAL DIGITAL ASSET (VDA — defined in §2(47A) to include cryptocurrency, NFTs and other notified digital assets) to deduct INCOME TAX at 1% of such sum at the time of credit OR payment, whichever is earlier.
• TDS kicks in only when the aggregate consideration in the FY EXCEEDS (a) ₹50,000 where the deductor is a 'specified person' (individual / HUF with turnover ≤ ₹1 Cr business / ₹50 L profession, OR an individual / HUF with NO business income);
• or (b) ₹10,000 in any OTHER case.
• If the consideration is in KIND (e.g. one VDA exchanged for another), the deductor must ensure tax has been paid before transferring the asset.
• Where the transaction is through an EXCHANGE, CBDT Circular 13/2022 permits the EXCHANGE to deduct TDS on behalf of buyer / seller.
• §194S is in ADDITION to the §115BBH flat-30% tax on VDA INCOME — TDS is on gross consideration, tax is on profit.
• Reported in Form 26Q / Form 26QE.

Reference: §194S, ITA 1961 (Finance Act 2022) — under ITA 2025 (FY 26-27 onwards), this is §393(1) Sl.8(vi)