1% TDS will be applicable on the total $7000. This is very important point. I missed it in my post above. When you sell crypto on Exchanges, the whole amount is considered as the transfer. So while showing the amount of consideration u/s 115BBH, you are required to show the whole amount $7000 but you can show $5000 as the cost of acquisition, hence the net amount chargeable to tax u/s 115BBH will be $2000.
This why it is better to use a local exchange than a P2P service platform as a local exchange would deduct the TDS straight away whereas if you do not use a local exchange you have to do the math. Just a reminder:
7 years jail if you do not pay TDS on time