Section 194S.
TDS on transfer of virtual digital assets (VDA / crypto).
Payment for transfer of cryptocurrency, NFTs, and other VDAs
When it applies
Section 194S, introduced in FY 2022-23, applies on any payment to a resident for the transfer of a virtual digital asset — cryptocurrencies (Bitcoin, Ethereum, etc.), NFTs, and any other digital asset notified as a VDA. The exchange or other facilitator is responsible for TDS if the transfer happens through them.
Who must deduct
Any person making the payment for transfer of a VDA. For peer-to-peer transactions, the buyer deducts. For exchange-mediated transactions, the exchange typically deducts.
Common mistakes
- Not deducting on each transaction — the threshold is annual but the deduction is at each payment crossing it.
- Confusing TDS under 194S with the 30% tax on VDA gains — they're separate. 194S is just a collection mechanism.
- Missing PAN-based aggregation across multiple exchanges.
- Failing to issue Form 16E to the recipient.
Frequently asked
Is gifting crypto subject to 194S?
No. Section 194S applies on consideration paid for the transfer. A pure gift, without consideration, is not within scope — though it may still be taxable in the recipient's hands under other provisions.
How does 194S work on an exchange-to-exchange transfer?
If you move your own crypto between two of your own wallets (or two exchanges where you're the same registered user), it's not a transfer for consideration, so no 194S. Selling on an exchange does trigger 194S — the exchange deducts and remits.
What about stablecoins?
Yes — stablecoins (USDT, USDC, etc.) are VDAs for 194S purposes. Any transfer for consideration attracts TDS at 1%.