Yes, the 1% TDS deducted under Section 194S on crypto transactions is refundable if your total tax liability for the year is lower than the TDS already deducted.
Claim it by reporting TDS credits in Schedule TDS and all transactions in Schedule VDA when you file your ITR. NRIs and the April 2026 exchange reporting rule add further compliance layers.
Key Takeaways
- A crypto TDS refund India taxpayers can claim arises when Section 194S deductions exceed actual tax liability.
- You must fill Schedule VDA in your ITR to report crypto gains and losses. Skipping it can trigger a notice.
- NRIs are taxed at a flat 30% on VDA gains in India, but treaty benefits and FEMA compliance add complexity.
- From April 1, 2026, Indian crypto exchanges must report all user transactions directly to the Income Tax Department.
- Penalties for non-disclosure can reach up to 200% of the tax due under Section 270A.
Is a Crypto TDS Refund India Taxpayers Can Claim Actually Possible After a Loss?
This is probably the most misunderstood part of India’s crypto tax framework. When you sell crypto on platforms like CoinDCX, WazirX, or ZebPay, the exchange deducts 1% TDS under Section 194S of the Income Tax Act on the gross sale value. That deduction happens regardless of whether you made a profit or a loss on that trade.
Say you bought Bitcoin worth Rs 2,00,000 and sold it for Rs 1,50,000. The exchange still deducts Rs 1,500 (1% of Rs 1,50,000) as TDS. You made a Rs 50,000 loss, so your actual tax liability from that trade is zero.
The Rs 1,500 TDS is now excess tax paid, and you are entitled to a crypto TDS refund. India’s Income Tax Act treats this as a standard overpayment credit, not a special crypto provision.
According to the Finance Act 2022 Memorandum, Section 194S was introduced specifically to create a transaction trail for Virtual Digital Assets (VDAs), with the 1% rate set deliberately below the 30% tax rate so that TDS functions as a tracking mechanism rather than a final tax.
This design is precisely why the crypto TDS refund India process exists for loss-making traders.
How to Claim a Crypto TDS Refund in Your ITR
The process is straightforward but requires attention to detail. First, download your Form 26AS or AIS (Annual Information Statement) from the Income Tax portal. This shows all TDS deducted under Section 194S against your PAN. Cross-check it against your exchange statements from WazirX, CoinDCX, Mudrex, or wherever you traded.
Next, report every crypto transaction in Schedule VDA of your ITR (ITR-2 or ITR-3 depending on your income sources). Enter the TDS details in Schedule TDS. The system automatically calculates if you have overpaid. If your total tax due is less than TDS deducted, the difference shows as a refund, which the Income Tax Department processes to your bank account. Our detailed guide on ITR filing for cryptocurrency in India walks through the exact form-filling steps.
What If the Exchange Did Not Deduct TDS Correctly?
This is a real issue, especially for peer-to-peer trades or transactions on smaller platforms. If TDS was not deducted by the exchange, the tax liability shifts to you as the seller. You are required to self-deposit the TDS using Challan 281 and report it in your ITR.
The CBDT’s Annual Report for FY 2023-24 confirmed that the department processed over 5,000 crypto-related scrutiny notices that year, with AIS-to-ITR mismatches cited as the primary trigger. Gaps between the two are a common cause of scrutiny notices.
If the exchange deducted TDS but it does not reflect in your Form 26AS, raise a grievance with the exchange first.
Exchanges have a legal obligation to deposit the deducted amount with the government within the prescribed due dates. You can also file a complaint on the Income Tax portal under the “e-Nivaran” section.
NRI Crypto Tax India: How Are Non-Resident Indians Treated?
NRIs holding or trading Virtual Digital Assets (VDAs) in India face the same 30% flat tax rate on gains as resident Indians.
There is no slab benefit, no basic exemption, no deduction under Chapter VI-A on VDA income. That is the explicit language of Section 115BBH, which applies to all persons, resident or not, on VDA income sourced in India.
Does Schedule VDA Apply to NRIs?
Yes, it does. If an NRI trades on an Indian exchange like ZebPay or CoinDCX, or holds crypto in a wallet linked to an Indian bank account, that income is considered to arise in India.
The NRI must file an ITR in India if their Indian-sourced income (including VDA gains) exceeds the basic exemption limit applicable to NRIs (Rs 2,50,000 for those below 60).
The TDS picture is slightly different for NRIs. Under Section 195, TDS on payments to NRIs is typically at rates applicable to their income type. But Section 194S specifically covers VDA transfers, and its provisions apply in the context of domestic exchange transactions.
This creates an ambiguity that the CBDT has not fully clarified through a dedicated circular as of mid-2026. NRIs should consult a qualified CA before assuming treaty relief applies to crypto gains.
NRI vs Resident Crypto Tax Comparison
| Tax Factor | Resident Indian | NRI (India-sourced VDA income) |
|---|---|---|
| Tax Rate on VDA Gains | 30% flat (Section 115BBH) | 30% flat (Section 115BBH) |
| Basic Exemption Benefit | Available on other income; not on VDA | Not available on VDA income |
| TDS Applicable | 1% under Section 194S | 1% under Section 194S (domestic exchanges) |
| Crypto TDS Refund India Eligibility | Yes, via ITR Schedule TDS | Yes, via ITR if India-sourced income filed |
| DTAA Treaty Relief on Crypto | Not applicable | Theoretically possible; no CBDT circular yet |
| FEMA Repatriation Limit | Not applicable | Up to USD 1 million per FY from NRO account |
| Loss Set-Off Across VDAs | Not permitted (Section 115BBH(2)(b)) | Not permitted (same rule applies) |
FEMA and RBI Considerations for NRI Crypto Traders
The RBI has not issued a blanket ban on crypto, but it has not provided a regulatory green light either. NRIs using NRE or NRO accounts to fund crypto trades on Indian exchanges operate in a grey zone under FEMA.
Repatriating crypto profits abroad from an NRO account requires meeting standard repatriation limits (up to USD 1 million per financial year after tax). You can read more about the broader regulatory picture in our guide to crypto tax rates in India and in our India crypto regulation overview.
India Crypto ITR Reporting 2026: The April Exchange Reporting Rule
Starting April 1, 2026, Indian crypto exchanges are required to report all user transaction data directly to the Income Tax Department under the Statement of Financial Transactions (SFT) framework. This was announced via amendments to Rule 114E of the Income Tax Rules.
The reporting covers buy/sell volumes, wallet addresses (where available), and user PAN details.
What this means practically: the Income Tax Department will have a near-complete picture of your crypto activity before you even file your ITR. The AIS will be pre-populated with crypto transaction data, similar to how salary income already appears.
If your ITR does not match this data, expect an automated notice.
For anyone who has previously skipped claiming a crypto TDS refund India rules entitle them to, this pre-population makes accurate filing both easier and more urgent.
What Exchanges Must Report From April 2026
| Data Point | Reporting Requirement | Frequency |
|---|---|---|
| Buy/Sell Transaction Value | All transactions above Rs 10,000 per transaction | Quarterly SFT filing |
| User PAN / Aadhaar | Mandatory KYC linkage | Per transaction |
| Wallet Addresses | On-chain wallet linked to exchange account | Annual summary |
| TDS Deducted (Section 194S) | Already reported via TDS returns | Quarterly TDS return |
| Airdrop / Staking Rewards | Proposed inclusion, pending final CBDT circular | Annual summary |
Airdrop and staking income reporting is still being finalised. If you have received airdrops, they are likely taxable as income at slab rates (not the 30% VDA rate) based on current CBDT guidance, though the position is not entirely settled. Check our explainer on whether airdrops are taxable in India for the latest interpretation.
Penalties for Non-Compliance: What Is Actually at Stake
Ignoring crypto tax obligations is not a low-risk strategy anymore. According to the CBDT Annual Report for FY 2023-24, the department processed over 5,000 crypto-related scrutiny notices that year, with the figure expected to rise sharply once the April 2026 SFT reporting rule takes effect. A separate Finance Ministry press release from March 2024 confirmed that VDA-related tax demand notices totalled over Rs 700 crore in FY 2023-24, underscoring the scale of enforcement activity.
Under Section 270A, under-reporting of income attracts a penalty of 50% of the tax due. If the under-reporting is deemed “misreporting” (intentional concealment), the penalty jumps to 200% of the tax due. On top of that, interest under Sections 234A and 234B applies on unpaid taxes from the assessment year due date.
For crypto specifically, the CBDT has clarified that losses from one VDA cannot be set off against gains from another VDA within the same year.
This is a hard rule under Section 115BBH(2)(b). So even if you are net flat across your portfolio, you can owe tax on the winning trades. Our full breakdown of the tax structure is covered in the how much tax on crypto in India guide.
Crypto Compliance Checklist Before You File ITR
- Download your AIS and Form 26AS. Match TDS credits under Section 194S with exchange statements to confirm your crypto TDS refund India entitlement.
- Export complete trade history from all Indian exchanges (WazirX, CoinDCX, ZebPay, Mudrex) and international platforms.
- Separate VDA income (30% flat tax, Schedule VDA) from other income. Do not net losses across VDAs.
- Report airdrop and staking income separately under “Income from Other Sources”.
- If you are an NRI, check whether your transactions are India-sourced and whether FEMA repatriation limits apply.
- File ITR-2 or ITR-3 (not ITR-1). ITR-1 does not have a Schedule VDA section.
Risk Disclosure
Crypto assets are highly volatile and unregulated in India. Tax rules for VDAs are still evolving, and interpretations can change with new CBDT circulars or judicial rulings.
This article is for informational purposes only and does not constitute tax or legal advice. Please consult a qualified Chartered Accountant for your specific situation.
Frequently Asked Questions
Can I get a crypto TDS refund in India if I made a loss?
Yes. TDS deducted under Section 194S is a tax credit, not a final tax. If your total tax liability for the year is less than the TDS already deducted, which happens when you have made losses or your income is below the taxable threshold, the excess TDS is refunded by the Income Tax Department after you file your ITR with Schedule VDA filled correctly. This is the standard crypto TDS refund India mechanism under the Income Tax Act.
What happens if an exchange does not deduct TDS correctly?
If the exchange fails to deduct TDS under Section 194S, the obligation to deposit the tax shifts to you, the seller. You must self-deposit using Challan 281 and report it in your ITR. The Income Tax Department cross-checks AIS data with filed returns, so gaps are likely to trigger an automated notice. Do not assume the exchange handled it without verifying your Form 26AS.
Are NRI crypto traders taxed the same as residents in India?
NRIs are taxed at the same flat 30% rate on VDA gains sourced in India under Section 115BBH. There is no slab benefit or basic exemption on this income. Double taxation treaty relief may apply in theory, but the CBDT has not issued clear guidance specific to crypto. NRIs should verify their residency status under FEMA and consult a CA before assuming any exemptions apply to their crypto TDS refund India claims.
What does the April 2026 exchange reporting rule mean for crypto investors?
From April 1, 2026, Indian crypto exchanges must file Statement of Financial Transactions (SFT) reports with the Income Tax Department covering user trade volumes, PAN details, and wallet addresses. Your AIS will likely be pre-populated with this data. Any mismatch between exchange-reported figures and your ITR will trigger scrutiny. Filing accurate, complete returns is no longer optional.
Which ITR form should I use to claim a crypto TDS refund in India?
Use ITR-2 if your income includes capital gains but no business income, or ITR-3 if you have business or professional income alongside crypto gains. ITR-1 (Sahaj) does not include Schedule VDA and cannot be used to report VDA transactions or claim a crypto TDS refund. India’s Income Tax portal will reject or flag returns where VDA income is omitted from the correct schedule.
Last updated: July 2026. Reviewed by the CryptoWire editorial team.
