Colonel Ajai Shukla, who writes the popular Broadsword Blog reports that the first LCA Prototype / "Technology Demonstrator 1" is in the process of being canibalised and used for spares for other aircraft. It is assumed that the aircraft has fulfilled all of its mission parameters and no further utility in extending its life is seen. It has been just over eight years since KH2001's first flight.
However the aircraft has not flown at all since over an year. The last flight (233rd) was done on 12th December 2007 by Gp Capt N Harish.
It is rather surprising to find a 'prototype' being grounded after 233 flights but it is not uncommon. While it is not known at this stage as to how much of KH2001 will remain, it is safe to assume that the aircraft will go to an appropriate museum for display.