Most Indians meet the 1% crypto TDS as a line on an exchange statement. The exchange deducts it, deposits it and reports it. On a peer-to-peer (P2P) trade, where you pay another person directly, that middleman is gone, and the law puts the duty on the person paying. For a normal salaried buyer that duty starts once the year’s P2P purchases pass ₹50,000.
What the law says
The rule now sits in section 393 of the Income-tax Act, 2025, which replaced section 194S of the 1961 Act from 1 April 2026. Serial 8(vi) of its table covers “any sum by way of consideration for transfer of a virtual digital asset”: any person paying it to a resident deducts 1%.
Serial 12 of the same section switches TDS off below two yearly limits:
| Who is paying | No TDS while the tax year’s total stays at or below |
|---|---|
| Individual or HUF with no business or profession income | ₹50,000 |
| Individual or HUF whose previous-year turnover was up to ₹1 crore (business) or ₹50 lakh (profession) | ₹50,000 |
| Anyone else (companies, larger businesses, firms) | ₹10,000 |
Two details matter. The limit is a yearly total, not a per-trade test. And once it is crossed, section 393(1)(a) applies the 1% “on the entire amount”, not just on the part above the limit. The Income Tax Department’s own threshold FAQ sets out the same two limits.
BtcMedia worked examples
All figures below use the rates in the Act; the trades are illustrations.
| Buyer | P2P purchases in the tax year | TDS the buyer owes |
|---|---|---|
| Salaried, buys USDT from individuals | ₹45,000 | ₹0 (below ₹50,000) |
| Salaried, buys USDT from individuals | ₹1,20,000 | ₹1,200 (1% of the full ₹1,20,000) |
| Shop owner with ₹2 crore turnover last year | ₹30,000 | ₹300 (₹10,000 limit applies) |
| Salaried, seller gives no valid PAN | ₹1,20,000 | ₹24,000 (20% rate) |
The second row is the one that surprises people. The buyer who crosses ₹50,000 in, say, January owes 1% on the earlier purchases too, so the deduction has to catch up on later payments.
The fourth row is the costly one. Where the seller has no valid PAN, the higher-rate provision in the Act sets 20% for this kind of payment, as tabulated here from the Gazette text. Ask for the seller’s PAN before you pay.
Crypto-for-crypto swaps
If you pay in another coin, there is no cash to cut 1% from. The TRACES FAQ on section 194S, carried into the new Act, says the payer must “ensure that tax required to be deducted has been paid” before releasing the consideration. In plain terms, someone has to deposit the 1% in rupees before the swap completes.
How a small buyer actually deposits it
An individual within the ₹50,000 category does not need a separate TAN (tax deduction account number). Under the 1961 Act this was a PAN-based challan-cum-statement, Form 26QE, filed through the tax portal, and the TRACES FAQ notes the deductor in that form can only be an individual or HUF. Check the current form name on the e-filing portal before you file, since forms are being renumbered under the 2025 Act.
Once deposited, the 1% is credited to the seller. It shows in their tax statement and is adjusted against their own 31.2% tax on any gain, so it is an advance, not an extra tax.
What it means for Indian investors
- If you sell P2P, the 1% should come off your proceeds. If a buyer pays in full and never deposits it, you lose the credit.
- If you buy P2P above ₹50,000 a year, the deduction is your legal duty, and a payer who misses it can face interest on the unpaid amount.
- Our crypto TDS calculator works out the 1% on any sale, and the TDS reconciliation tool helps match what your statement shows. For the gain itself, use the crypto tax calculator.
- Related: how to get crypto TDS refunded and why USDT sales carry the same 1% TDS.
BtcMedia verdict
For a buyer staying under ₹50,000 a year, P2P carries no TDS paperwork. Above that, the exchange route is simpler, because the exchange handles the deduction, deposit and reporting. P2P buyers who cross the limit need to run the TDS step themselves, and should never pay a seller who will not share a PAN.
FAQ
Does a buyer have to deduct TDS on every P2P crypto purchase? No. An individual or HUF without business income, or under ₹1 crore turnover, deducts only once the tax year’s total passes ₹50,000. Other payers use a ₹10,000 limit.
Is the 1% charged only on the amount above ₹50,000? No. Once the limit is crossed, the Act applies 1% to the entire consideration for the year.
What if the seller has no PAN? The higher-rate provision sets 20% for this payment instead of 1%.
How we calculated this: rates and limits from section 393 of the Income-tax Act, 2025 and Income Tax Department FAQs, read 30 October 2026, 6:50 AM IST; example trades are illustrative. This is general information, not tax or financial advice. Check your own case with a tax professional.