194S TDS Rates on Cryptocurrency and Digital Assets



Quick Summary
Section 194S of the Income Tax Act mandates Tax Deducted at Source (TDS) on the transfer of Virtual Digital Assets (VDAs), including cryptocurrencies and NFTs. A 1% TDS rate applies when paying a resident, with higher rates for non-residents or non-filers. Exemptions exist for small transactions, and specific procedures are outlined for depositing TDS and issuing certificates.

194S TDS is applicable on the payment for the transfer of Virtual Digital Assets (which include cryptocurrencies and non-fungible tokens).

Who will be the Deductor and Deductee?

DeductorDeductee
Any person who is responsible for paying to any resident any sum by way of consideration for the transfer of a virtual digital asset is required to deduct TDS u/s 194S.Tax required to be deducted if the amount is paid or payable to a resident person if the recipient of the consideration is a non- resident, the tax may be deductible u/s 195.

Rate of 194S TDS

  • 1% TDS on the transfer of crypto assets.
  • If no PAN then TDS at 20% as per Section 206AA
  • For non-filing of return, TDS at 1% (for specified payer) or 5% (for non-specified payer) as per the Section 206AB.

Exemption from 194S TDS

  • If consideration is payable by any person (other than specified person) and its aggregate value does not exceed Rs. 10,000 during the financial year.
  • If consideration is payable by any person (other than specified person) and its aggregate value does not exceed Rs. 50,000 during the financial year.

How to deposit of TDS?

  • Specified Persons is required to deposit TDS via Form 26QE within 30 days of the month's end.
  • Others can deposit via Challan ITNS 281 within 7 days of the month's end (March TDS by April 30).
CategoryFiling of TDS StatementTDS Certificate
Specified PersonsFile Form 26QEIssue Form 16E within 15 days of filing Form 26QE.
OthersFile Form 26Q quarterlyIssue Form 16A within 15 days of filing Form 26Q.

Consequences on Failure to Deduct/Deposit TDS

Interest

  • For non-deduction: 1% per month from due date till deduction.
  • For non-deposit: 1.5% per month from deduction date till deposit.

Penalties and Prosecution

  • Penalty u/s 271C or 221.
  • Prosecution u/s 276B for non-deposit, unless reasonable cause is proven.

Failure to Furnish TDS Statement:

  • Fee: Rs.200/day under Section 234E (capped at TDS amount).
  • Penalty: Rs.10,000 to Rs.100,000 under Section 271H, or Rs.500/day under Section 272A.

Failure to Issue TDS Certificate:

Penalty applicable to Rs.500/day u/s 272A during default period.

Click Here To Know - Cryptocurrency Taxation in India




About the Author

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Finance Professional

I write about Income Tax, GST, TDS, RBI updates, government schemes, and personal finance in India. My focus is on simplifying complex tax and compliance topics into easy-to-understand guides that help readers stay updated with the latest financial rules, investment options, and regulatory changes.

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