TDS on Crypto section 194S

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This discussion explains how to account for cryptocurrency purchases where Tax Deducted at Source (TDS) is applied under Section 194S of the Income Tax Act. It provides the specific journal entries for recording the purchase and the subsequent deposit of TDS with the government. Key points include the TDS rate, the importance of filing Form 26Q, issuing Form 16A, and handling payments made in kind.

Sandeep Jain

Sandeep Jain (Querist)
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25 April 2025 Dear Sir.

We have purchased Some Bit coin tds deducted under Section 194S Please suggest how to pass the entry in books of accounts

Thank you

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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12 August 2025 The full cost of acquisition is ₹1,00,000, not ₹99,000.

You must file TDS return in Form 26Q and issue a TDS certificate (Form 16A) to the seller.

If payment is in kind or partly in kind and cash, you must ensure TDS is paid before transfer of asset.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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12 August 2025 Certainly! Here's how to **record the accounting entry** when you purchase cryptocurrency (e.g., Bitcoin) and deduct **TDS under Section 194S** of the Income Tax Act, 1961.

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### 🧾 **Background – Section 194S:**

* Applicable from **1st July 2022**.
* Requires **TDS @ 1%** on the transfer of **Virtual Digital Assets (VDAs)** like Bitcoin.
* The **buyer** (you) must deduct TDS and deposit it with the government.

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### 💼 **Accounting Entry in the Books of Buyer (You):**

Let’s say:

* Bitcoin purchased for ₹1,00,000
* TDS @1% = ₹1,000
* Net payment to seller = ₹99,000

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#### 📘 **Journal Entry:**

```
Cryptocurrency (Bitcoin) A/c Dr. ₹1,00,000
To TDS Payable (Sec 194S) A/c ₹1,000
To Bank A/c ₹99,000
(Being Bitcoin purchased and TDS deducted under Sec 194S)
```

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### 📝 **Subsequent Entry (When TDS is Deposited):**

```
TDS Payable (Sec 194S) A/c Dr. ₹1,000
To Bank A/c ₹1,000
(Being TDS deposited with government u/s 194S)
```

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### ✅ **Key Notes:**

1. The full **cost of acquisition is ₹1,00,000**, not ₹99,000.
2. You must file **TDS return in Form 26Q** and issue a **TDS certificate (Form 16A)** to the seller.
3. If payment is in **kind or partly in kind and cash**, you must ensure TDS is paid **before** transfer of asset.

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