How to Claim Your 1% Crypto TDS Back

TDS is not a cost — it is a prepayment

The most expensive misunderstanding in Indian crypto is treating the 1% TDS as a fee. It is tax collected in advance under Section 194S, credited against your final liability, and refunded if it exceeds what you actually owe.

People who believe it is a fee go looking for routes that avoid it. Those routes do not reduce the tax and do add risk.

When you get money back

TDS applies to the gross value of each transfer. Tax applies to your gain. Those are very different numbers, and the gap is where refunds come from.

Situation	Outcome
High turnover, small profit	TDS often exceeds tax due — refund
Loss-making year	TDS was still deducted — refund
Few trades, large gain	Tax exceeds TDS — balance payable
No other income, small gains	Possible refund depending on total liability

A trader turning over ₹50,00,000 with ₹1,00,000 profit has roughly ₹50,000 of TDS against about ₹31,200 of tax. The difference is refundable — but only if a return is filed.

Step one: check what was actually deducted

1. Log in to the income tax e-filing portal.
2. Open Form 26AS and find TDS deducted under Section 194S.
3. Open the Annual Information Statement and check the crypto transaction entries.
4. Compare both against your exchange statements, transaction by transaction.

Do this during the year, not at filing. If an exchange deposited TDS against a wrong or missing PAN, the credit never reaches you, and fixing it with the exchange months later is considerably harder.

Step two: file the right return

You cannot get a refund without filing. Crypto income requires ITR-2 (no business income) or ITR-3 (with business income) — ITR-1 has no Schedule VDA.

1. Report each transfer in Schedule VDA with its acquisition date, cost and consideration.
2. Compute tax at 30% plus surcharge and cess on the gain.
3. Claim the TDS credit as shown in Form 26AS.
4. If TDS exceeds the liability, the return shows a refund due.
5. Verify the return — an unverified return is not processed, and no refund is issued.

Common reasons a refund does not arrive

• The return was never verified. Filing is only half the process.
• Bank account not pre-validated on the portal, or not linked to your PAN.
• PAN mismatch, so the TDS credit sits against a different or no PAN.
• Mismatch between the return and the AIS, which triggers a query instead of a refund.
• Losses were set off against gains in the computation, which Section 115BBH(2) does not permit — this produces a wrong figure and a notice.

The working capital point

Even when fully refundable, TDS ties up capital from the moment it is deducted until the return is processed — potentially more than a year. For an active trader that is a real constraint on strategy, even though it is not a real cost.

It is the main reason high-frequency trading from Indian platforms became harder after July 2022, and it is worth modelling before committing to a high-turnover approach.

Checking Form 26AS properly

Form 26AS aggregates tax deposited against your PAN. For crypto, look specifically for entries under Section 194S and check three things rather than just the total.

1. The deductor — each exchange appears separately, so confirm every platform you used is present.
2. The amount — reconcile against the TDS shown on your own exchange statements.
3. The quarter — deductions are reported quarterly and a late filing by an exchange can mean an entry appears after you expected it.

A deduction missing from Form 26AS is not lost, but recovering it means going back to the exchange to have the return corrected, which is considerably easier during the year than after filing.

Refund timing

Refunds are issued after the return is processed, not when it is filed. Processing commonly takes weeks to a few months depending on volume and whether anything in the return needs review.

Two things delay it disproportionately: an unverified return, which is not processed at all, and a bank account that is not pre-validated and linked to your PAN on the portal. Both are worth checking before you file rather than chasing afterwards.

Do not chase the TDS at the cost of the tax

A pattern worth naming: traders restructuring activity specifically to reduce TDS, using routes where nobody deducts it. That does not reduce tax owed — it removes the automatic credit, moves the whole compliance burden onto you, and for offshore platforms adds Schedule FA considerations with far larger penalties attached.

The TDS was always going to come back. The obligations taken on to avoid it do not.

Related guides

• 1% crypto TDS explained
• Reporting crypto in your ITR
• How crypto tax is calculated
• Crypto record-keeping

Educational content, not financial or tax advice. Fees, limits and processing times change — confirm current terms on the platform. Exchange links are referral links; we may earn a commission at no cost to you.