Onus of deducting TDS primarily rests on crypto exchanges: CBDT FAQ

business-standard.com:

The income tax department on Wednesday said the 1 per cent TDS on transfer of virtual digital assets would be levied on net transaction value and the onus of deducting the tax would primarily be on the exchanges.

The Central Board of Direct Taxes (CBDT) issued an FAQ on the TDS provisions on virtual digital assets (VDA) or cyptocurrencies, which was introduced in 2022-23 Budget and will be effective from July 1.

The frequently asked questions (FAQ) said in a peer-to-peer (direct buyer to seller) transaction, the buyer paying the consideration will be required to deduct the tax deducted at source (TDS).

However, in case the transaction is taking place through an exchange, the onus of deducting TDS will be on the exchange which is crediting or making payment to the seller.

In case the credit/payment between exchange and the seller is through a broker (and the broker is not seller), there has to be a written agreement that the broker would be deducting the tax.

"The Exchange would be required to furnish a quarterly statement (in Form 26QF) for all such transactions of the quarter on or before the due date prescribed in the Income-tax Rules, 1962," the CBDT said.

The FAQ further said for transfer of VDAs owned by the exchanges, the buyer or his/her broker would be required to deduct the tax.

As an alternative, the exchange may enter into a written agreement with the buyer or his broker that in regard to all such transactions, the exchange would be paying the tax on or before the due date for that quarter.

With regard to transactions in kind or in exchange of another VDA, the FAQ said the exchange will enter into a written contractual agreement with the buyers/sellers for deducting tax.

"In these situations, the person