Guidelines for removal of difficulties under sub-section (6) of section 194S of the Income-tax Act, 1961

TDS on virtual digital assets: 1% withholding at credit/payment, Exchanges may assume deduction and reporting responsibilities.

Section 194S mandates 1% TDS on consideration for transfer of virtual digital assets at time of credit or payment, with exemptions where aggregate consideration in a financial year does not exceed specified thresholds for specified persons and others. For Exchange transactions, the Exchange paying the seller is primarily liable to deduct; brokers may be responsible per agreement; Exchanges may assume deduction when they are sellers or where consideration is in kind, converting withheld non primary VDAs into primary VDAs and INR via prescribed verifiable market orders and reporting in Form 26Q/26QF, with deposits made as per Income tax Rules.