India’s crypto tax framework includes a 1% Tax Deducted at Source (TDS) on qualifying crypto transactions. This TDS is deducted automatically by exchanges like ZebPay. But TDS is not your final tax. If the TDS deducted in a year exceeds your actual 30% tax liability on gains, you are entitled to a refund. This guide explains how to claim it.
What is the 1% TDS on Crypto?
Under Section 194S of the Income Tax Act, a 1% TDS applies to the transfer of Virtual Digital Assets (VDAs) above specified thresholds:
- ₹50,000 per year for specified individuals (individuals required to get their accounts audited under Section 44AB) transacting with other specified individuals
- ₹10,000 per year for others
This TDS is deducted by the exchange (ZebPay) at the time of each qualifying transaction and remitted to the government on your behalf.
Consult a qualified tax professional for the latest thresholds and your specific applicability. Tax rules are subject to change.
When Does TDS Exceed Your Tax Liability?
TDS is deducted on the gross transaction value (before calculating gain or loss). Your 30% tax is only on your net gain.
Scenario 1: You made a loss If you sold crypto at a loss, your taxable gain is zero. But TDS was still deducted on the sale value. In this case, all TDS deducted becomes a refund.
Scenario 2: Small gains, large turnover You might have transacted ₹5,00,000 worth of crypto but made only ₹20,000 in gains. The TDS deducted would be ₹5,000 (1% of ₹5,00,000), but your 30% tax on ₹20,000 gain is only ₹6,000. The difference (₹5,000 TDS vs ₹6,000 tax) is small, but in scenarios with larger turnover and small gains, TDS can significantly exceed your tax.
Scenario 3: No gains at all If you only made trades where every transaction was at a loss or break-even, you owe no 30% tax. All TDS deducted is refundable.
How to Claim TDS Refund: Step-by-Step
Step 1: Download Your TDS Certificate (Form 26AS or AIS)
ZebPay deposits your TDS with the government and files TDS returns. Your TDS deductions appear in:
- Form 26AS: Available on the Income Tax e-filing portal (incometax.gov.in)
- Annual Information Statement (AIS): A comprehensive statement of financial transactions now available on the IT portal
Log into the Income Tax e-filing portal and download your Form 26AS and AIS to verify TDS credits.
Step 2: Verify TDS Amounts Match
Compare the TDS shown in your ZebPay transaction history with what appears in your Form 26AS or AIS. If there is a discrepancy, contact ZebPay’s customer support before filing.
Step 3: Calculate Your Net Tax Liability
Calculate your total crypto gains for the year:
- Total sale proceeds from all qualifying transactions
- Minus cost of acquisition for each sale
- Net gain is taxed at 30%
Step 4: Compare Tax Liability vs TDS Paid
If TDS paid > 30% tax on gains, the difference is your refund amount.
Example:
- Total gains: ₹30,000
- 30% tax: ₹9,000
- TDS paid: ₹15,000
- Refund: ₹6,000
Step 5: File Your ITR with Schedule VDA
In your ITR (typically ITR-2 for investors), fill Schedule VDA with all crypto transactions. The form auto-calculates your tax based on your entries.
In the tax payment section, enter all TDS deducted. If TDS exceeds your liability, the system will show a refund amount.
Step 6: Submit and Wait for Refund Processing
After submitting your ITR, the Income Tax Department processes refunds after verification. Refunds are typically credited to your bank account within a few weeks to a few months, depending on the filing and processing cycle.
Important Notes on TDS and Refunds
TDS cannot be carried forward. If you do not file your ITR, you lose the right to claim TDS as a refund for that year.
Timely filing is critical. File before the ITR deadline (typically July 31) to claim your refund in the normal processing cycle.
Maintain documentation. Keep your ZebPay transaction history, Form 26AS, and all relevant records in case the IT Department asks for clarification.
Consult a qualified tax professional for advice specific to your situation. Tax rules are subject to change.
Frequently Asked Questions About Crypto TDS Refunds in India
Can I claim TDS refund if I made no profits on crypto?
Yes. If your net gain is zero or you made a loss, any TDS deducted is fully refundable through your ITR.
How long does an IT refund take?
Typically 4 to 12 weeks after processing. Pre-validation of your bank account on the IT portal speeds up the credit.
Does ZebPay file TDS returns on my behalf?
ZebPay deducts TDS and files TDS returns with the government. The deducted amounts appear in your Form 26AS.
What if ZebPay’s TDS records do not match my Form 26AS?
Contact ZebPay’s customer support to resolve any discrepancy before filing your ITR. Filing with incorrect TDS amounts can cause complications in your refund.
Is TDS refundable even for small amounts?
Yes. You can claim TDS refund for any amount through your ITR, regardless of size.
What form do I use to claim crypto TDS refund?
Most crypto investors file ITR-2. Your refund is claimed by filling Schedule VDA and the TDS schedule accurately. The system calculates the refund automatically.
Can I use my TDS refund to pay my next year’s tax?
You can adjust excess TDS against future advance tax obligations, but the mechanism differs from a direct carry-forward. Consult a qualified tax professional.
Final Thoughts
The 1% TDS on crypto transactions in India is not always your final tax. If your actual tax liability at 30% is less than the TDS deducted, you can claim the difference back as a refund through your ITR.
Always maintain your ZebPay transaction history, verify TDS in Form 26AS, and file your ITR on time to claim what you are entitled to.
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Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The information in this article is for educational purposes only and does not constitute financial or investment advice.