- Crypto trades in India attract a 1% TDS since July 2022 under Section 194S of the Income Tax Act
- Excess TDS deducted can be claimed as a refund by reporting correctly in the Income Tax Return
- Crypto gains are taxed at 30%, with cost of acquisition as the only deductible expense
Many crypto investors only realise how much tax has been deducted from their trades when they sit down to file their income tax returns.
Since July 2022, every sale or transfer of cryptocurrencies and other virtual digital assets (VDAs) on Indian exchanges has attracted a 1 per cent Tax Deducted at Source (TDS) under Section 194S of the Income Tax Act. Over dozens (or even hundreds) of trades -- that amount can add up quickly.
The good news is that if your total tax liability is lower than the TDS already deducted, you can claim the excess back while filing your Income Tax Return (ITR). But that refund won't come automatically. You need to report it correctly.
According to Pranav Pagaria, SVP - Finance & Strategy, crypto TDS should not be viewed as an additional tax.
"It is simply an advance tax collection mechanism, much like TDS on salary or bank interest," Pagaria explained. "Your final tax liability is calculated while filing the ITR. If more tax has been deducted than you actually owe, the excess can be claimed as a refund."
He pointed out that crypto gains continue to be taxed at a flat 30 per cent, while only the cost of acquisition can be claimed as a deduction under the current tax rules.
Start By Checking Your Crypto TDS Report
The first step is to find out how much TDS has already been deducted.
Pagaria said most Indian crypto exchanges provide a dedicated TDS report under the account's reports section. This is separate from the usual profit and loss statement.
The report typically includes transaction dates, sale value, TDS deducted, the exchange's TAN, your PAN, quarterly deductions and the annual total.
However, investors should not rely only on the exchange report.
Pagaria advised taxpayers to verify these figures with Form 26AS or the Annual Information Statement (AIS) available on the Income Tax Department portal.
"If there is any mismatch, it is often because of a PAN-linking issue or reporting error. That should be resolved with the exchange before filing the return," he said.
How To Claim The Refund
Claiming the refund is straightforward if the information is reported correctly. Crypto gains have to be disclosed under Schedule VDA while filing ITR-2 or ITR-3, depending on the taxpayer's profile.
Each transaction should be reported separately, including the purchase date, sale date, sale consideration, cost of acquisition and the resulting gain or loss.
Pagaria noted that investors should remember one important rule: losses from one virtual digital asset cannot be adjusted against gains from another.
The TDS already deducted must then be reported under Schedule TDS, where taxpayers have to mention the deductor's TAN, the amount deducted and the relevant financial year.
"If you don't claim the TDS credit while filing the return, the tax department will not consider that amount while calculating your refund," Pagaria said.
After filing, the return must be e-verified. Refund status can then be tracked online. Once the return is processed and the bank account linked to PAN is pre-validated, refunds are generally issued within a few weeks.
Keep Records Before The July Deadline
For taxpayers who are not required to get their accounts audited, the deadline to file returns for FY 2025-26 (AY 2026-27) is July 31, 2026. Pagaria cautioned that investors often misunderstand how crypto TDS works.
"TDS only reduces your final tax liability. It does not mean the entire amount deducted will be refunded. If your crypto trades generated taxable gains, you will still have to pay tax at the applicable rate. Only the excess TDS, if any, is refundable," he said.
He added that poor record-keeping remains one of the biggest reasons for filing errors.
"The biggest mistake investors make is waiting until the last few days before the deadline to reconcile transactions. Maintaining accurate records throughout the year makes the filing process much smoother," Pagaria said.
(Disclaimer: Investors should consult a qualified tax professional for advice based on their individual financial situation.)
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