1% TDS on every crypto trade in impossible

This query is : Resolved

Akshay Mehra (Querist)
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04 October 2025
“My crypto trading volume is very high (around $16,000 daily), but my actual income is only about $400 per month. I mainly trade to generate volume for earning airdrops. In this case, is it still mandatory to pay 1% TDS on every trade, or is paying 30% tax on actual profit sufficient? The TDS can go up to $4,800, which is impossible to pay.”

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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04 October 2025 For Indian residents, the 1% TDS (Tax Deducted at Source) on crypto trades is mandatory and applies to the gross transaction value, not just profits, regardless of the trader’s actual net income or purpose (including generating volume for airdrops) as long as annual transaction volume exceeds ₹10,000 (or ₹50,000 for specified individuals) per year. Paying the 30% tax on actual profits or income is a separate obligation and does not remove or offset the requirement to pay the 1% TDS on each eligible trade.

The TDS amount accumulated can be offset against the final tax liability when filing the income tax return, and any excess TDS can be claimed as a refund.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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04 October 2025 The 1% TDS is deducted on every trade above the annual threshold, regardless of whether the trades are profitable or loss-making.

This TDS is a compliance and tracking tool, not a substitute for income tax on profits.

Failing to deduct or deposit TDS can result in significant penalties and prosecution under Indian tax law.

Indian exchanges typically auto-deduct TDS; for foreign exchanges or P2P trades, the trader is responsible for deducting and depositing TDS.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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04 October 2025 Any actual profits from crypto trading are separately taxed at a flat rate of 30%, with no deductions except for the acquisition cost.

Income from airdrops is initially taxed at the recipient’s regular income tax slab based on the market value at receipt, and gains on later sale are taxed at 30% as capital gains.

The 1% TDS is deducted on the gross value of every eligible crypto transfer or sale (not just profits) above certain yearly thresholds (₹50,000 for most individuals, ₹10,000 for others) as soon as the transaction occurs. Its main objective is to track crypto transactions and ensure tax compliance, and it is deducted regardless of whether the seller makes a profit or loss.

The TDS amount accumulated can be offset against the final tax liability when filing the income tax return, and any excess TDS can be claimed as a refund.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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04 October 2025 Good luck...

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