Tag TDS

The growth of cryptocurrencies, NFTs, and other virtual digital assets (VDAs) has altered India’s financial and investment sector. The government applies a 1% Tax Deducted at Source (TDS) on VDA transfers in order to monitor digital transactions and maintain tax transparency. Sections 393(1) [Table S.No. 8(vi)] and 393(4) [Table S.No. 12] of the Income Tax Act 2025 presently regulates this provision.

Meaning and Purpose of 1% TDS

TDS is a mechanism where tax is collected at the time of a transaction instead of at the end of the year. The 1% TDS on VDAs applies when one person pays another for transferring a digital asset. Whenever money changes hands for such an asset, 1% of the payment is deducted and paid to the government as an advance tax.

The purpose of this rule is to track crypto transactions, ensure traders do not avoid tax, and create a transparent audit trail in a sector often marked by anonymity.

Under the Income Tax Act, 1961

The 1% TDS was originally introduced through Section 194S in the older 1961 Act. It applied to any person making a payment to a resident for the transfer of a VDA. This covered both exchange trades and peer-to-peer transfers. The deduction was required at the time of credit or payment, whichever happened earlier.

Under the New Income Tax Act, 2025

The Income Tax Act, 2025, which is effective for the current tax year, provides a modern legal framework for digital assets. The new Act defines VDAs broadly to include any cryptographically generated representation of value or rights. The government has retained the 1% TDS under Section 393 with refined procedures using Form 141.

Key features under the 2025 Act:

• Unified Framework: VDAs are categorised as capital assets, ensuring consistent tax treatment across all digital tokens.
• Integrated Deduction System: The 1% TDS process is automated through the government portal using Form 141 Schedule D.
• Thresholds: TDS is required if the transaction value exceeds 10,000 rupees. For specified persons (individuals/HUFs with turnover below 1 crore), the threshold is 50,000 rupees.
• Real-time Reporting: Transactions are reported through linked data using Form 141, which acts as both a challan and a statement.
• Penalty Provisions: Section 446 of the new Act imposes strict penalties for failing to deduct or remit TDS on time.

Comparison

Aspect	Income Tax Act, 1961	Income Tax Act, 2025
Legal Provision	Section 194S	Section 393
Scope	Cryptocurrencies and NFTs	All VDAs including stablecoins and crypto-assets
Rate of TDS	1%	1%
Thresholds	10,000 / 50,000 rupees	10,000 / 50,000 rupees
Reporting Form	Form 26QE	Form 141 (Schedule D)
Credit Statement	Form 26AS / AIS	Form 168 (Unified AIS)
Enforcement	Manual Audit-Based	Real-time Digital Monitoring

Practical Effects on Taxpayers

The 1% TDS rule makes it possible for traders and investors to track even small cryptocurrency transactions. It validates digital assets inside the tax framework while also adding a compliance step. At present, exchanges are essential to the automatic deduction and remittance of TDS utilising Form 141. Individual traders’ manual labour is reduced as a result.

However, because the tax is deducted even if the sale is a loss, high-frequency traders can find that the deduction has an impact on their daily liquidity. The 2025 Act’s automation makes it easier to reconcile these deductions while paying taxes.

Conclusion

One important measure for financial transparency in India is the 1% TDS on VDA transactions. The system has developed into a technology-driven procedure under the 2025 Act, particularly Section 393 and Form 141. For both the government and the taxpayer, it offers real-time monitoring and more seamless compliance. Anyone trading in the digital asset market in 2026 must have a thorough understanding of these parts.

Many taxpayers face situations where TDS (Tax Deducted at Source) is deducted from their income even when they do not have to pay any tax. Later, they have to claim a refund while filing the return. To avoid this hassle, the Income Tax Act allows eligible people to submit Form 15G or Form 15H.

These forms are self-declarations asking the payer (like banks, EPF offices, insurance companies, etc.) not to deduct TDS if your total income is below the taxable limit or your tax liability is nil.

What are Form 15G and Form 15H?

• Form 15G is for residents below 60 years, Hindu Undivided Families (HUF), and certain trusts.
• Form 15H is for resident senior citizens aged 60 years and above.

Both forms can only be filed by Indian residents. NRIs cannot use them. These forms can be submitted to banks and other tax deductor to ensure that TDS is not deducted where it is not applicable.

Who Can Use These Forms?

You can submit Form 15G if:

• You are below 60 years.
• Your total income is below the basic exemption limit (₹2.5 lakh in old regime, ₹4 lakh in new regime for FY 2025–26).
• There is no tax payable on your total income.

You can submit Form 15H if:

• You are a resident senior citizen (60 years or older).
• Your tax liability is nil, even if interest income exceeds the exemption limit.

When and Where to Submit?

These forms must be submitted at the start of every financial year (preferably in April). This way, banks or other institutions will not deduct TDS throughout the year.

You can submit them:

• To banks (for FD, RD, or savings interest)
• To EPF authorities (for withdrawals before 5 years)
• To companies (for bonds or dividends)
• To post offices (for deposits)
• To tenants (for rent subject to TDS)
• To insurance companies (for commission or maturity proceeds)

Most banks also accept online submission via their website.

Where Are These Forms Useful?

These forms are commonly used to avoid TDS on:

• Bank interest on FD/RD (Sec 194A)
• EPF withdrawals (Sec 192A)
• Rent (Sec 194-I)
• Dividends (Sec 194, 194K)
• Insurance commission (Sec 194D)
• Life insurance maturity (Sec 194DA)
• Corporate bond interest (Sec 193)
• National Savings Scheme withdrawals (Sec 194EE)

Each of these has a specific threshold, beyond which TDS applies if forms are not submitted.

What If You Forget to Submit?

If you miss the deadline, TDS may still be deducted. However, you can:

• File an Income Tax Return to claim the refund.
• Submit the form later to stop further deductions for the rest of the year.

Filling the Forms – Step by Step

When filling Form 15G/15H, you need to:

• Enter your name, PAN, and residential status.
• Mention the financial year for which the form is being filed.
• Declare your estimated income (interest, rent, etc.) where TDS applies.
• State your total expected income for that year.
• Provide investment details (FD numbers, bond details, etc.).
• Sign the declaration confirming that your tax liability is nil.

Only fill this form if you meet the eligibility conditions. Filing a false declaration can lead to penalties and imprisonment under the Income Tax Act.

Penalty for False Declaration

If someone files these forms even when their income is taxable, it is considered a false statement. This may lead to:

• Imprisonment (3 months to 7 years), and
• Heavy fines, especially if the tax evaded is above ₹25,000.

So, be truthful while filing.

Conclusion

Forms 15G and 15H are simple forms to avoid unnecessary TDS deductions. They save you from the trouble of claiming refunds later. Submit them every year at the start of April, ensure all details are correct, and keep copies for records.

For seamless process, consult a tax expert or use online resources provided by banks and the Income Tax Department.