Cryptocurrency exchanges want clarity on TDS liability if they move operations overseas

economictimes.indiatimes.com:

Mumbai: Some cryptocurrency exchanges that have either moved or are looking to move out of India have reached out to their tax advisors to figure out if they are required to still comply with the 1% TDS regulation. Many tax experts have said that if an exchange sets up an office outside the country, the taxman may find it tough to collect the 1% tax on transactions. The government in this budget introduced a 1% tax deducted at source or TDS on every transaction, along with a30% tax on returns of investors and traders.

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Some of the largest cryptocurrency exchanges including CoinDCX, BuyUCoin, Koinex, Zebpay, Coindelta, CoinRecoil, and Coinome have either already moved overseas or are in the process of doing so. Industry trackers point out that while exchanges can comply with TDS, they must build technology from scratch that could eat into their margins further. Also, such technology development does not work in their favour as TDS makes market making economically infeasible, say insiders. “Exchanges don’t find complying with TDS economical as they have to build technology to carry out the calculations millions of times and it eats into their wafer-thin margins," said Gaurav Mehta, founder of Catax, a cryptocurrency tax consultancy firm. However, legal experts point out that despite the tax department’s apparent inability to implement the law in the absence of any data, exchanges themselves may find it challenging going ahead. «Moving exchange outside India may not absolve the exchanges of