TDS u/s 194S on Crypto: Reconcile Exchange 194S with Form 26AS Before Filing
1% TDS applies under s.194S ITA 1961 on VDA transfers above ₹50,000/year for specified persons and ₹10,000/year for others, deducted by the exchange and credited to you via 26AS. Reconcile exchange TDS with 26AS/AIS transaction-by-transaction before filing to avoid a 143(1) demand.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
1% TDS applies under s.194S of the Income-tax Act, 1961 to every VDA transfer by a resident, deducted by the exchange (or the buyer on P2P) — and the single most common reason a crypto filer gets a s.143(1) demand is that the TDS they claimed does not match what 26AS and AIS actually show. The rate is 1%, the threshold is ₹50,000 per financial year for specified persons and ₹10,000 for everyone else, and the reconciliation rule is simple: claim only what appears in your 26AS/AIS, and before you file, close the gap between what the exchange says it deducted and what the department says it received.
The s.194S charge at a glance
The deduction is made before crediting the sale consideration. On Indian exchanges the exchange is the deductor — it withholds 1% on your sale proceeds and deposits it to the Government account, and the credit flows to your Form 26AS and AIS. On a P2P transfer with no exchange, the buyer is the deductor, and a P2P seller who received full consideration with no TDS is exposed if the buyer defaulted (CBDT Circular 13/2022 governs the mechanics).
Note on forms: the exchange's 1% TDS is reported through its TDS statement (Form 26Q) and the credit appears in your Form 26AS; a TDS certificate (Form 16A) is issued on request. — confirm the current certificate and statement forms for your assessment year.
Where the TDS appears
- Form 26AS — TDS section: the s.194S deduction by the exchange appears here once the exchange files its TDS statement and the credit is posted.
- AIS — TDS/TCS and SFT sections: AIS mirrors the TDS credit and separately reports the gross VDA transactions under the SFT (Statement of Financial Transactions) data. These are two different numbers: TDS (a credit) and gross consideration (the department's record of the trade).
A common misread: the AIS "VDA" transaction figure is gross sale consideration, not TDS. Reconcile both — the TDS credit against your liability, and the gross consideration against your Schedule VDA disclosures.
Why exchange TDS and 26AS disagree — the mismatch table
Changed FY 2025-26: No change to the s.194S rate or thresholds — 1% with the ₹50,000/₹10,000 limits has applied since 1 July 2022. What changed is visibility: exchange TDS statements and VDA SFT data now reach a far larger share of filers' AIS, so a claimed credit that does not reconcile with 26AS is caught automatically at s.143(1) processing.
The reconciliation workflow (do this before filing)
- Log in to the income-tax portal → AIS → download the AIS (PDF + JSON) and open Form 26AS.
- Pull the exchange statement — every exchange that deducted TDS, per transaction, with the TDS amount and PAN used.
- Compare line by line — for each sale, match: date, gross consideration, TDS amount, and PAN against 26AS.
- Flag mismatches — note each transaction where the amounts differ or the TDS is missing from 26AS.
- Chase corrections — if the exchange used a wrong PAN or section, ask it to file a correction statement (TDS return correction) so 26AS updates.
- Raise AIS feedback for entries that are genuinely not yours (wrong PAN, unrelated transaction).
- File only what reconciles — claim TDS credit only for amounts appearing in 26AS/AIS; for anything else, document why and keep the paper trail.
Do not claim credit for TDS that appears in neither 26AS nor AIS. A claimed credit that the department cannot verify is precisely what triggers a 143(1) adjustment with interest.
Worked example: Ananya's ETH sale — the ₹500 gap
Persona: Ananya, salaried, sells Ethereum on a large Indian exchange, FY 2025-26.
Facts:
- Sells ETH for ₹8,00,000 on 20 March 2026.
- Exchange deducts 1% TDS = ₹8,000, shows it on her dashboard.
- She files her ITR on 15 July 2026 claiming ₹8,000 credit.
The problem: the exchange's TDS statement for the March quarter is filed in April–May, but the credit posts to her 26AS after she files. Her 26AS shows ₹7,500 (an earlier trade's TDS), not ₹8,000. The department's system compares her claimed ₹8,000 against 26AS ₹7,500.
Step 1 — Before filing: download 26AS (portal shows "as per 26AS" for the TDS credit). If ₹8,000 is not there, either wait for the posting or claim ₹7,500 and reconcile ₹500 separately.
Step 2 — After the posting: if the ₹8,000 appears after filing and she claimed less, she can revise (s.139(5)) if within the due date, or file a rectification (s.154) to claim the balance credit.
Step 3 — Documentation: keep the exchange TDS certificate, the trade confirmation, and the 26AS screenshot. If the department later flags the ₹500, the paper trail closes it.
The ₹500 looks trivial — but a 143(1) intimation built on a TDS mismatch scales with every under-reconciled trade. Reconcile at transaction level before you file.
See Also
Frequently Asked Questions
What is the TDS rate on crypto transfers under Section 194S?
1% TDS applies under s.194S to every VDA transfer by a resident, deducted by the exchange (or the buyer on P2P). The threshold is ₹50,000 per FY for specified persons and ₹10,000 for everyone else.
Why does the CPC issue a s.143(1) demand after crypto filing?
The single most common reason is that the TDS claimed does not match what 26AS and AIS actually show. Claim only what appears in your 26AS/AIS, and before filing, close the gap between what the exchange says it deducted and what the department says it received.
How do I reconcile exchange 194S with Form 26AS?
Before filing, compare the TDS certificates from your exchange against the 26AS/AIS entries. The reconciliation rule is simple: claim only what appears in your 26AS/AIS. Any mismatch triggers a s.143(1) adjustment.
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