Quick Summary
The Ministry of Finance has officially rejected a key proposal to ease the tax burden on crypto transactions, retaining the contentious 1% Tax Deducted at Source (TDS) under Section 194S of the Income Tax Act. The proposal to reduce the TDS to 0.01% and raise the transaction threshold to Rs 5 lakh was denied in the Select Committee Report on the Income Tax Bill, 2025, tabled in Parliament this week. Currently, a 1% TDS applies to all VDA transactions exceeding Rs 10,000 (or Rs 50,000 for speci
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FAQ :
No, the Ministry of Finance has rejected proposals to reduce the 1% TDS rate on crypto transactions. The rate remains at 1% under Section 194S of the Income Tax Act.
The proposal was to reduce the TDS rate to 0.01% and raise the transaction threshold for TDS to Rs 5 lakh annually. This was denied in the Select Committee Report on the Income Tax Bill, 2025.
The Ministry stated that the current thresholds and rates have been sufficiently rationalised and that different payment types have different income components, justifying varied rates.
The industry believes the current 1% TDS rate reduces liquidity, encourages Indian users to move to offshore platforms, and results in significant TDS leakage. They project India could lose up to Rs 17,700 crore in TDS over five years if the rate persists.
Yes, the Ministry also declined proposals for uniform TDS rates, exemptions for offshore suppliers, and expressed concerns about the move from section-based to table-format compliance.
India continues to adopt a 'tax-first, regulate-later' approach. While a regulatory framework is still being discussed, tax measures like the 30% capital gains tax and the 1% TDS remain in effect.
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