You sold crypto at a loss last year, the exchange still took 1% of every sale as TDS, and no money has come back. That is the normal outcome, not an error. A crypto TDS refund is never paid automatically: the Income Tax Department returns excess tax only when you file an income tax return that claims it. For sales made between 1 April 2025 and 31 March 2026, the last date to do that is 31 December 2026.

This guide explains why the 1% is only a credit, when it turns into a refund, the two dates that decide how much interest you get, and why an updated return (ITR-U) cannot be used for the purpose. It describes the rules as the department publishes them and is not advice on any asset.

Why the 1% is a credit, not a tax

The 1% is tax deducted at source on the sale value, not on your gain. Where you sell through an exchange that pays you, the Income Tax Department’s explainer on TDS on VDA transfers says “the exchange shall be liable to deduct tax at source”. In a peer-to-peer sale, the buyer deducts it. For sales up to 31 March 2026 the rule is section 194S of the Income-tax Act, 1961; from 1 April 2026 it is section 393(1) of the Income-tax Act, 2025, Table entry 8(vi).

Because it is charged on what you receive, the 1% is deducted whether a trade makes money or not. The actual tax is worked out separately in your return: 30% on the gain from each transfer, with only the purchase cost deductible and no set-off of losses, as our guide to crypto tax in India explains. The TDS deducted against your PAN is then subtracted from that tax. If the TDS is larger, the difference is a refund.

Two worked examples

A seller with only losses. Ravi has no other taxable income. In 2025-26 he sold tokens on an Indian exchange for ₹6,00,000 that had cost him ₹7,50,000.

Ravi, tax year 2025-26 Amount
Sale value ₹6,00,000
TDS deducted by the exchange at 1% ₹6,000
Loss ₹1,50,000
Tax on VDA income (a loss is not taxed, and cannot be set off) Nil
Refund due if he files a return ₹6,000

A seller with one gain and one loss. Meera sold coin A for ₹3,00,000 (cost ₹2,00,000) and coin B for ₹5,00,000 (cost ₹6,50,000).

Meera, tax year 2025-26 Coin A Coin B Total
Sale value ₹3,00,000 ₹5,00,000 ₹8,00,000
TDS at 1% ₹3,000 ₹5,000 ₹8,000
Gain or loss ₹1,00,000 gain ₹1,50,000 loss Loss on B ignored
Tax at 30% on the gain, before cess and any surcharge ₹30,000 Nil ₹30,000
Left to pay after TDS credit ₹22,000

Meera gets no refund even though she lost money overall, because the loss on coin B cannot reduce the tax on coin A. But the ₹5,000 deducted on the losing sale still counts: it is credit against her whole tax bill, not only against coin B. These figures are our illustration; cess and surcharge are added on top of the 30%, and the rest of a person’s income is taxed under the normal slabs.

The deadline: 31 December 2026

Since 1 September 2019, a refund “can be claimed only through filing of return of income within the time limit prescribed under Section 139”, according to the department’s page on refund of excess tax. If you missed the original due date, a belated return can still be filed “till 31st December of the relevant assessment year”, or before the assessment is completed, whichever is earlier, says the department’s tax calendar note on belated and revised returns. For 2025-26 sales, that means 31 December 2026. The same date is the limit for revising a return you filed but in which the TDS was left out.

After that, the updated return route stays open for years, but not for refunds. Section 139(8A) of the Income-tax Act, 1961 bars an updated return (ITR-U) that results in a refund or increases the refund due on an earlier return, as our guide to the ITR-U updated return explains. The only other route is a condonation request to the department, and the refund page says no such claim is accepted more than five years after the end of the assessment year.

How much interest the refund earns

Interest on a refund of TDS is 0.5% for each month or part of a month under section 244A, according to the department’s refund page. When it starts depends on when you file:

When the return was filed Interest on a TDS refund runs from
By the due date under section 139(1) 1 April of the assessment year (1 April 2026 for 2025-26 sales)
After the due date, as a belated return The date the return is filed

No interest is paid if the refund is less than 10% of the tax determined on processing. Ravi’s ₹6,000 would earn ₹30 for each month or part month counted, so the larger cost of filing late is the deadline itself, not the lost interest.

Before you file: check the credit is there

A refund can only cover TDS that the deductor has deposited and reported against your PAN. Check Form 26AS and the Annual Information Statement before filing; our guide to AIS vs 26AS shows where TDS appears in each. Then report every sale in the return’s VDA schedule, as set out in our Schedule VDA guide.

If a peer-to-peer buyer deducted tax but it is missing from your statements, ask for the certificate. A buyer who is an individual or Hindu undivided family without business income deposits the tax through Form 26QE “within 30 days from the last day of the month in which the tax has been deducted” and must issue a Form 16E certificate within 15 days of the due date of that form, the department’s VDA explainer says. If you never gave your PAN, tax could have been deducted at 20% under section 206AA, which makes the refund larger but the credit harder to trace.

Sales made from 1 April 2026 fall in tax year 2026-27, under the Income-tax Act, 2025. Their TDS is claimed in the return for that year, filed in 2027; our guide to the Income-tax Act, 2025 changes explains the new form and section numbers.

Questions

Why did I not get my crypto TDS back automatically?

The department refunds excess tax only through a return of income. Exchanges deposit the 1% against your PAN; it stays there as credit until a return claims it.

Can I get a TDS refund if I made a loss on crypto?

Yes, if your total tax for the year is less than the TDS deducted. The loss itself cannot be set off against other income, but the TDS on loss-making sales still counts as credit.

What is the last date to claim TDS on crypto sold in 2025-26?

31 December 2026, through a belated or revised return, unless the assessment is completed earlier.

Can I claim a crypto TDS refund in ITR-U?

No. An updated return cannot be filed if it results in a refund or increases one.

Does the crypto TDS refund earn interest?

Yes, at 0.5% a month or part month, from 1 April of the assessment year if filed on time, or from the filing date for a belated return, unless the refund is under 10% of the tax determined.

Sources

Sources checked on 15 November 2026. Worked examples are our calculation.