Response:- Any person responsible for paying to any resident person any sum by way of consideration for the transfer of a virtual digital asset is required to deduct tax at source under Section 194S. The person responsible for the deduction of tax under different circumstances shall be as follows:
(a) Where the buyer and seller of virtual digital asset know each other in an over-the-counter (OTC) deal, the buyer shall deduct tax at source.
(b) In case of exchange of VDAs, both payer and payee may be liable to deduct tax at source as the transfer of VDA happens from both sides.
(c) Where VDAs are transferred through an Exchange and payment to the seller is made directly by the exchange, In such cases, the exchange shall be liable to deduct tax at source.
(d) Where VDAs are transferred through an Exchange but the payment is made to the seller through a broker. In such case, both the Exchange and the broker shall be liable to deduct tax at source. However, if there is a written agreement between the Exchange and the broker that the broker shall be deducting tax on such payment, then such broker alone may deduct the tax.
(e) Where VDA being transferred is owned by the exchange itself, the primary responsibility to deduct tax shall be of the buyer or his broker. However, 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.
(f) Where one VDA is exchanged with another VDA through an Exchange, the primary responsibility to deduct tax is of though buyer and the seller. But, as an alternative, the Exchange may deduct tax based on a written contractual agreement with the buyer and the seller.
(g) Where the payment for the transfer of VDA is made through payment gateways, the payment gateway will not be required to deduct tax if the tax has been deducted by the person required to make deduction under this provision.
