1% TDS and 30% Tax on Crypto in India – How It Works for USDT and P2P
India has one of the strictest tax regimes for crypto. Two rules matter most: 1% TDS on transfers and 30% tax on gains. Both apply to USDT like any other crypto, because USDT is a “virtual digital asset” (VDA) under Indian tax law. Union Budget 2026 kept both rates unchanged. This guide explains both rules with examples, how they work on P2P, and how to file.
From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act and renumbered many sections. The TDS rule known as Section 194S is now Section 393; the rules themselves carried over.
Work out your own numbers with the crypto tax calculator, or see the live USDT to INR rate.
30% tax on gains
Since 1 April 2022 (first under Section 115BBH), gains from transferring a VDA are taxed at a flat 30%, plus surcharge where applicable and 4% cess.
- No deductions except the cost of acquiring the asset. Exchange fees, internet costs and so on can’t be deducted.
- Losses can’t be set off against other income or against other VDA gains, and can’t be carried forward.
- Holding period doesn’t matter. The rate is the same whether you held for a day or for years.
- Slab doesn’t matter. Even if your other income is below the taxable limit, VDA gains are taxed at 30%.
Example 1: a single gain
| Bought 1,000 USDT at ₹100 | Cost ₹1,00,000 |
| Sold 1,000 USDT at ₹103 | Proceeds ₹1,03,000 |
| Gain | ₹3,000 |
| Tax at 30% + 4% cess | ₹936 |
Example 2: a gain and a loss in the same year
| Trade | Result |
|---|---|
| USDT: bought ₹1,00,000, sold ₹1,03,000 | Gain ₹3,000 |
| Another coin: bought ₹50,000, sold ₹45,000 | Loss ₹5,000 |
| Taxable | ₹3,000: the loss can’t be set off |
| Tax at 31.2% | ₹936 |
You pay tax on the USDT gain even though your overall crypto result for the year is a loss.
1% TDS on transfers (Section 194S, now Section 393)
Since 1 July 2022, whoever pays for a VDA must deduct 1% TDS and deposit it with the government, if total payments in the financial year cross the threshold:
| Payer type | Annual threshold |
|---|---|
| “Specified persons”: individuals and HUFs with no business income, or business turnover up to ₹1 crore / professional receipts up to ₹50 lakh | ₹50,000 |
| Everyone else | ₹10,000 |
TDS is not an extra tax: it’s an advance. It appears in your Form 26AS / AIS, and you claim it as a credit when you file. If your final tax is lower than the TDS, the difference is refunded.
Example 3: TDS on a sale
Selling 1,000 USDT for ₹1,03,000: TDS of 1% is ₹1,030, so you’d receive ₹1,01,970 if TDS is deducted. In your return, the tax on the gain is ₹936; the ₹1,030 TDS credit covers it and ₹94 comes back as a refund.
How this works on P2P
On an exchange’s order book, the exchange deducts TDS before paying you. On P2P, you pay another user directly, so under the law the buyer of the USDT is responsible for deducting TDS once the yearly threshold is crossed, and the seller claims it as a credit.
In practice:
- Some exchanges handle TDS inside the P2P order. Check the order details for a TDS line and keep a copy.
- Many P2P trades happen without TDS being deducted. That doesn’t remove the seller’s tax on gains, which still has to be reported.
- If you’re a frequent buyer who crosses the threshold, ask a chartered accountant how to meet your deduction obligations.
Filing your return
- Report VDA gains in Schedule VDA of your return (ITR-2 or ITR-3).
- Report each transfer separately: date acquired, date transferred, cost of acquisition and consideration received.
- Claim the TDS credit shown in Form 26AS / AIS.
- Income you receive in USDT, for example freelance work, is income under the normal heads when received. Later gains or losses on that USDT are VDA gains.
Records to keep
- Every P2P order: date, price, amount, order ID, counterparty’s verified name, and any TDS shown.
- Bank statements matching each payment, with UTRs.
- Exchange tax reports, if your exchange provides them.
- Transfers between your own accounts and wallets, with TxIDs, so your cost basis is clear.
coinglee’s daily price history helps you value USDT received on a given date.
Common questions
Is buying USDT taxed? Buying alone isn’t a taxable gain. Tax arises when you transfer: sell, swap or spend.
Do I pay tax if USDT’s price barely moved? Yes, on any rupee gain. USDT’s INR price moves with the P2P market, so buying low and selling high creates a taxable gain.
Can I avoid TDS by trading P2P? No. The obligation sits with the buyer, and the seller’s tax on gains applies regardless.
This is general information as of October 2026, not tax advice. Rules can change in each Union Budget; check with a chartered accountant for your situation. See also is crypto legal in India.