{"id":32797,"date":"2026-08-12T22:48:41","date_gmt":"2026-08-12T17:18:41","guid":{"rendered":"https:\/\/carajput.com\/blog\/?p=32797"},"modified":"2026-08-12T23:02:23","modified_gmt":"2026-08-12T17:32:23","slug":"icai-guidance-on-auditors-examining-vda-transactions","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/icai-guidance-on-auditors-examining-vda-transactions\/","title":{"rendered":"ICAI Guidance on Auditors Examining VDA Transactions"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a7cce40984e2\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a7cce40984e2\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/icai-guidance-on-auditors-examining-vda-transactions\/#ICAI_Guidance_on_Auditors_Examining_VDA_Transactions\" title=\"ICAI Guidance on Auditors Examining VDA Transactions\">ICAI Guidance on Auditors Examining VDA Transactions<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/icai-guidance-on-auditors-examining-vda-transactions\/#Form_3CD_Clause-by-Clause_Verification_for_VDAs\" title=\"Form 3CD Clause-by-Clause Verification for VDAs\">Form 3CD Clause-by-Clause Verification for VDAs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/icai-guidance-on-auditors-examining-vda-transactions\/#Clause_26_%E2%80%93_Particulars_of_TDS\" title=\"Clause 26 \u2013 Particulars of TDS \">Clause 26 \u2013 Particulars of TDS <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/icai-guidance-on-auditors-examining-vda-transactions\/#Clause_32_%E2%80%93_Speculation_Profit_Characterization\" title=\"Clause 32 \u2013 Speculation \/ Profit Characterization:\">Clause 32 \u2013 Speculation \/ Profit Characterization:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/carajput.com\/blog\/icai-guidance-on-auditors-examining-vda-transactions\/#Clause-36_%E2%80%93_Exempt_Income\" title=\"Clause-36 \u2013 Exempt Income: \">Clause-36 \u2013 Exempt Income: <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/carajput.com\/blog\/icai-guidance-on-auditors-examining-vda-transactions\/#Clause-44_%E2%80%93_GST_Turnover_Break-up\" title=\"Clause-44 \u2013 GST Turnover Break-up:\">Clause-44 \u2013 GST Turnover Break-up:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/carajput.com\/blog\/icai-guidance-on-auditors-examining-vda-transactions\/#FEMA_Foreign_Exchange_Compliance\" title=\"FEMA &amp; Foreign Exchange Compliance\">FEMA &amp; Foreign Exchange Compliance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/carajput.com\/blog\/icai-guidance-on-auditors-examining-vda-transactions\/#Audit_Workpaper_Standards\" title=\"Audit Workpaper Standards: \">Audit Workpaper Standards: <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/carajput.com\/blog\/icai-guidance-on-auditors-examining-vda-transactions\/#Practical_Takeaway\" title=\"Practical Takeaway\">Practical Takeaway<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/carajput.com\/blog\/icai-guidance-on-auditors-examining-vda-transactions\/#Quick_Audit_Snapshot_on_VDA_Transactions\" title=\"Quick Audit Snapshot on VDA Transactions\">Quick Audit Snapshot on VDA Transactions<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-32798\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2026\/08\/VDA-transactions.jpeg\" alt=\"VDA transactions \" width=\"1280\" height=\"853\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2026\/08\/VDA-transactions.jpeg 1280w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2026\/08\/VDA-transactions-300x200.jpeg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2026\/08\/VDA-transactions-1024x682.jpeg 1024w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2026\/08\/VDA-transactions-768x512.jpeg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2026\/08\/VDA-transactions-800x533.jpeg 800w\" sizes=\"(max-width: 1280px) 100vw, 1280px\" \/><\/h2>\n<h2><span class=\"ez-toc-section\" id=\"ICAI_Guidance_on_Auditors_Examining_VDA_Transactions\"><\/span><span style=\"color: #000080;\">ICAI Guidance on Auditors Examining VDA Transactions<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The ICAI Exposure Draft expects auditors to examine VDA transactions through existing Form 3CD clauses and proposed VDA-specific disclosures. The objective is to ensure that crypto, NFTs, tokenized carbon credits, and DeFi transactions are properly reported and reconciled.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Form_3CD_Clause-by-Clause_Verification_for_VDAs\"><\/span><span style=\"color: #000080;\"><strong>Form 3CD Clause-by-Clause Verification for VDAs<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table>\n<tbody>\n<tr>\n<td><span style=\"color: #000080;\"><strong>Form 3CD Clause<\/strong><\/span><\/td>\n<td><span style=\"color: #000080;\"><strong>Requirement<\/strong><\/span><\/td>\n<td><span style=\"color: #000080;\"><strong>VDA Audit Focus<\/strong><\/span><\/td>\n<\/tr>\n<tr>\n<td><strong>Clause-13<\/strong><\/td>\n<td>Method of Accounting<\/td>\n<td>Verify valuation methodology adopted for VDAs such as FIFO, WAC (Weighted Average Cost), or Mark-to-Market.<\/td>\n<\/tr>\n<tr>\n<td><strong>Clause-19<\/strong><\/td>\n<td>Amounts not deductible<\/td>\n<td>Verify that no prohibited VDA expenses have been claimed as a deduction under Section 115BBH.<\/td>\n<\/tr>\n<tr>\n<td><strong>Clause-26<\/strong><\/td>\n<td>Particulars of TDS<\/td>\n<td>Verify Section 194S compliance and reconcile TDS deducted on VDA transfers.<\/td>\n<\/tr>\n<tr>\n<td><strong>Clause-32<\/strong><\/td>\n<td>Speculation \/ Deemed Profit<\/td>\n<td>Examine whether VDA activity is investment, capital asset, or business trading.<\/td>\n<\/tr>\n<tr>\n<td><strong>Clause-36<\/strong><\/td>\n<td>Exempt Income<\/td>\n<td>Verify basis of exemption claimed for carbon credits or other digital assets.<\/td>\n<\/tr>\n<tr>\n<td><strong>Clause-44<\/strong><\/td>\n<td>GST Break-up<\/td>\n<td>Segregate VDA turnover and carbon credit turnover wherever relevant.<\/td>\n<\/tr>\n<tr>\n<td><strong>Proposed VDA Clause<\/strong><\/td>\n<td>New ICAI Disclosure<\/td>\n<td>Report wallets, exchanges, asset types, transaction values, and FMV methodology.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span style=\"color: #000080;\"><strong>Clause-13 \u2013 Method of Accounting<\/strong><\/span><\/p>\n<p>Auditor should verify Whether the taxpayer consistently follows FIFO (First-In First-Out), WAC (Weighted Average Cost) and Any other recognized valuation method. For Example<\/p>\n<table style=\"height: 339px;\" width=\"800\">\n<tbody>\n<tr>\n<td width=\"177\"><strong>Transaction<\/strong><\/td>\n<td width=\"115\"><strong>Quantity<\/strong><\/td>\n<td width=\"102\"><strong>Cost<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"177\">Buy BTC<\/td>\n<td width=\"115\">1<\/td>\n<td width=\"102\">INR 20 lakh<\/td>\n<\/tr>\n<tr>\n<td width=\"177\">Buy BTC<\/td>\n<td width=\"115\">1<\/td>\n<td width=\"102\">INR 30 lakh<\/td>\n<\/tr>\n<tr>\n<td width=\"177\">Sell BTC<\/td>\n<td width=\"115\">1<\/td>\n<td width=\"102\">?<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Under FIFO, cost = INR 20 lakh.<\/p>\n<p>Under WAC, cost = INR 25 lakh.<\/p>\n<p>The auditor should ensure consistency and adequate documentation.<\/p>\n<p><span style=\"color: #000080;\"><strong>Clause-19 \u2013 Amounts Not Deductible<\/strong><\/span><\/p>\n<p>Section 115BBH permits deduction only of the cost of acquisition in computing income from the transfer of VDAs. The auditor should check that the assessee has not claimed exchange fees, wallet fees, gas fees, mining expenses, advisory expenses, and internet\/server expenses against VDA income. For Example<\/p>\n<table style=\"height: 334px;\" width=\"877\">\n<tbody>\n<tr>\n<td width=\"213\"><strong>Particulars<\/strong><\/td>\n<td width=\"159\"><strong>Amount<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"213\">Sale Value<\/td>\n<td width=\"159\">INR 10,00,000<\/td>\n<\/tr>\n<tr>\n<td width=\"213\">Acquisition Cost<\/td>\n<td width=\"159\">INR 6,00,000<\/td>\n<\/tr>\n<tr>\n<td width=\"213\">Trading Fee<\/td>\n<td width=\"159\">INR 25,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Only INR 6,00,000 is generally deductible while computing VDA gains.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Clause_26_%E2%80%93_Particulars_of_TDS\"><\/span><span style=\"color: #000080;\"><strong>Clause 26 \u2013 Particulars of TDS <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Section 194S requires TDS on transfer of VDAs subject to prescribed thresholds. The auditor should verify exchange-wise TDS deduction, Form 26AS reconciliation, P2P transaction compliance, and OTC transaction compliance. And crypto-to-crypto swap transactions. For Example<\/p>\n<table style=\"height: 278px;\" width=\"810\">\n<tbody>\n<tr>\n<td width=\"135\"><strong>Exchange<\/strong><\/td>\n<td width=\"147\"><strong>Sale Value<\/strong><\/td>\n<td><strong>TDS<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"135\">Binance<\/td>\n<td width=\"147\">INR 5,00,000<\/td>\n<td>INR 5,000<\/td>\n<\/tr>\n<tr>\n<td width=\"135\">CoinDCX<\/td>\n<td width=\"147\">INR 3,00,000<\/td>\n<td>INR 3,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>The auditor should verify that TDS appears in Form 26AS and matches exchange reports.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Clause_32_%E2%80%93_Speculation_Profit_Characterization\"><\/span><span style=\"color: #000080;\"><strong>Clause 32 \u2013 Speculation \/ Profit Characterization:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The auditor should determine the nature of VDA activity. The following factors are considered:<\/p>\n<table style=\"height: 373px;\" width=\"835\">\n<tbody>\n<tr>\n<td width=\"211\"><strong>Investor<\/strong><\/td>\n<td><strong>Trader<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"211\">Occasional transactions<\/td>\n<td>Frequent transactions<\/td>\n<\/tr>\n<tr>\n<td width=\"211\">Long holding period<\/td>\n<td>Short holding period<\/td>\n<\/tr>\n<tr>\n<td width=\"211\">Capital appreciation motive<\/td>\n<td>Trading profit motive<\/td>\n<\/tr>\n<tr>\n<td width=\"211\">Limited activity<\/td>\n<td>Organized business activity<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>Importance <\/strong>classification influences accounting treatment, disclosure requirements, and Tax audit reporting. Even though Section 115BBH applies to VDA transfers, proper characterization remains important for audit purposes.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Clause-36_%E2%80%93_Exempt_Income\"><\/span><span style=\"color: #000080;\"><strong>Clause-36 \u2013 Exempt Income: <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Where carbon credit income is claimed as exempt, the auditor should obtain supporting evidence. Documentation may include government notification, advance rulings, judicial precedents, and registry documentation. For Example,<\/p>\n<table style=\"height: 321px;\" width=\"806\">\n<tbody>\n<tr>\n<td width=\"231\">Carbon Credit Type<\/td>\n<td width=\"269\">Auditor Action<\/td>\n<\/tr>\n<tr>\n<td width=\"231\">Traditional CER<\/td>\n<td width=\"269\">Verify basis of exemption\/treatment<\/td>\n<\/tr>\n<tr>\n<td width=\"231\">Blockchain tokenized credit<\/td>\n<td width=\"269\">Assess VDA implications<\/td>\n<\/tr>\n<tr>\n<td width=\"231\">Voluntary credits<\/td>\n<td width=\"269\">Verify classification note<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3><span class=\"ez-toc-section\" id=\"Clause-44_%E2%80%93_GST_Turnover_Break-up\"><\/span><span style=\"color: #000080;\"><strong>Clause-44 \u2013 GST Turnover Break-up:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The auditor should separately identify:<\/p>\n<table style=\"height: 317px;\" width=\"1014\">\n<tbody>\n<tr>\n<td width=\"226\">Category<\/td>\n<td>Amount<\/td>\n<\/tr>\n<tr>\n<td width=\"226\">VDA turnover<\/td>\n<td>INR XX<\/td>\n<\/tr>\n<tr>\n<td width=\"226\">Carbon credit turnover<\/td>\n<td>INR XX<\/td>\n<\/tr>\n<tr>\n<td width=\"226\">Exempt turnover<\/td>\n<td>INR XX<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>This helps reconcile GST returns, Books of account and Form 3CD disclosures<\/p>\n<p><strong>Proposed New VDA Clause: <\/strong>The proposed clause may require disclosure of<\/p>\n<ul>\n<li>Wallet details like wallet addresses and custodial and self-custodial wallets. Exchange details like Binance, CoinDCX, Coinbase, WazirX, and Kraken.<\/li>\n<li>Asset Details like Bitcoin, Ethereum, NFTs, gaming tokens, and Carbon-credit tokens<\/li>\n<li>Valuation Basis like FMV source, Exchange rates used and Acquisition-cost methodology<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"FEMA_Foreign_Exchange_Compliance\"><\/span><span style=\"color: #000080;\"><strong>FEMA &amp; Foreign Exchange Compliance<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Many taxpayers hold VDAs on overseas platforms, creating an additional FEMA risk.<\/p>\n<p>Foreign Exchange Checklist<\/p>\n<ul>\n<li>Foreign exchanges, for example, Binance, Coinbase, Kraken, and Bybit. Auditor should identify Assets held abroad, Foreign wallet balances and Cross-border transfers<\/li>\n<li>FEMA Compliance: Auditor verifies whether reporting obligations arise for overseas holdings, foreign exchanges, and overseas investments. Additional documentation may include Foreign exchange remittance records, bank statements, and FEMA declarations<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li><strong>Carbon Credit Exports: <\/strong>Carbon credits sold to foreign buyers may generate foreign currency receipts. The auditor should verify Foreign inward remittance, FEMA compliance and Realisation documentation<\/li>\n<li><strong>The Cross-Border DeFi Activities: <\/strong>Examples include foreign liquidity pools, overseas lending protocols, and international staking platforms. Risk areas include Permanent Establishment (PE), Dependent Agent PE (DAPE), and DTAA implications. A separate tax note is advisable for material exposures.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Audit_Workpaper_Standards\"><\/span><span style=\"color: #000080;\"><strong>Audit Workpaper Standards: <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Good VDA audits should be supported by comprehensive workpapers.<\/p>\n<table style=\"height: 693px;\" width=\"926\">\n<tbody>\n<tr>\n<td width=\"95\"><strong>Workpaper<\/strong><\/td>\n<td><strong>Purpose<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"95\"><strong>WP-1<\/strong><\/td>\n<td>Master VDA transaction register<\/td>\n<\/tr>\n<tr>\n<td width=\"95\"><strong>WP-2<\/strong><\/td>\n<td>Exchange reconciliation<\/td>\n<\/tr>\n<tr>\n<td width=\"95\"><strong>WP-3<\/strong><\/td>\n<td>TDS reconciliation<\/td>\n<\/tr>\n<tr>\n<td width=\"95\"><strong>WP-4<\/strong><\/td>\n<td>Carbon credit classification matrix<\/td>\n<\/tr>\n<tr>\n<td width=\"95\"><strong>WP-5<\/strong><\/td>\n<td>Wallet balance reconciliation<\/td>\n<\/tr>\n<tr>\n<td width=\"95\"><strong>WP-6<\/strong><\/td>\n<td>DeFi income computation<\/td>\n<\/tr>\n<tr>\n<td width=\"95\"><strong>WP-7<\/strong><\/td>\n<td>Form 3CD disclosure support<\/td>\n<\/tr>\n<tr>\n<td width=\"95\"><strong>WP-8<\/strong><\/td>\n<td>Management Representation Letter<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>WP-1: Master VDA Register; <\/strong>Should contain Date, Token, Quantity, FMV, INR value, Wallet, Exchange and TDS status<\/p>\n<p><strong>WP-2: Exchange Reconciliation: Purpose<\/strong>:<\/p>\n<p>Exchange Statement<\/p>\n<p>\u2193<\/p>\n<p>Books<\/p>\n<p>\u2193<\/p>\n<p>Tax Computation<\/p>\n<p>\u2193<\/p>\n<p>Schedule VDA<\/p>\n<p>Every difference should be explained.<\/p>\n<p><strong>WP-3: TDS Reconciliation: <\/strong>Reconcile: Transaction Register vs Form 26AS, Auditor Identify Missing TDS, short deduction, and Excess deduction<\/p>\n<p><strong>WP-4: Carbon Credit Matrix<\/strong><\/p>\n<table style=\"height: 400px;\" width=\"912\">\n<tbody>\n<tr>\n<td width=\"245\"><strong>Credit Type<\/strong><\/td>\n<td><strong>Classification<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"245\">UNFCCC CER<\/td>\n<td>Traditional<\/td>\n<\/tr>\n<tr>\n<td width=\"245\">Verra Credit<\/td>\n<td>Further review<\/td>\n<\/tr>\n<tr>\n<td width=\"245\">Toucan Credit<\/td>\n<td>Potential VDA<\/td>\n<\/tr>\n<tr>\n<td width=\"245\">KlimaDAO Token<\/td>\n<td>Potential VDA<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong>WP-5: Wallet Reconciliation: The auditor<\/strong>\u00a0must verify: Opening Balance + Additions \u2212 Sales \/ Transfers = Closing Balance for each wallet.<\/p>\n<p><strong>WP-6: DeFi Income Schedule: <\/strong>Capture staking rewards, Yield farming rewards, liquidity pool income, and airdrops along with FMV and tax treatment.<\/p>\n<p><strong>WP-7: Form 3CD Support File: <\/strong>Audit Should contain Clause-wise disclosures, Working papers, reconciliations, and Auditor conclusions<\/p>\n<p><strong>WP-8: Management Representation Letter: <\/strong>Management should confirm All wallets disclosed, All exchanges disclosed, No undisclosed VDA activity, and completeness of information provided.<\/p>\n<p><strong>Step 10: Technology Tools Used in VDA Audits<\/strong><\/p>\n<table style=\"height: 587px;\" width=\"814\">\n<tbody>\n<tr>\n<td width=\"194\"><strong>Tool<\/strong><\/td>\n<td width=\"306\"><strong>Purpose<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"194\"><strong>Koinly \/ CoinTracker \/ ZenLedger<\/strong><\/td>\n<td width=\"306\">Aggregates transactions and computes gains<\/td>\n<\/tr>\n<tr>\n<td width=\"194\"><strong>Etherscan \/ BSCScan \/ Polygonscan<\/strong><\/td>\n<td width=\"306\">Blockchain verification of wallet transactions<\/td>\n<\/tr>\n<tr>\n<td width=\"194\"><strong>CBDT AIS Portal<\/strong><\/td>\n<td width=\"306\">Compare exchange-reported transactions with taxpayer disclosures<\/td>\n<\/tr>\n<tr>\n<td width=\"194\"><strong>GST Portal (GSTR-2B)<\/strong><\/td>\n<td width=\"306\">Verify ITC relating to carbon-credit transactions<\/td>\n<\/tr>\n<tr>\n<td width=\"194\"><strong>Chainalysis \/ Elliptic<\/strong><\/td>\n<td width=\"306\">AML and risk assessment of crypto transactions<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3><span class=\"ez-toc-section\" id=\"Practical_Takeaway\"><\/span><span style=\"color: #000080;\"><strong>Practical Takeaway<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A robust VDA audit should allow an assessing officer to trace a transaction from Wallet\/Exchange \u2192 Transaction Register \u2192 Books of Account \u2192 Schedule VDA \u2192 Form 26AS \u2192 Form 3CD \u2192 ITR with complete supporting evidence at every stage. This is the core objective behind the proposed VDA-focused audit documentation framework<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Quick_Audit_Snapshot_on_VDA_Transactions\"><\/span><span style=\"color: #000080;\">Quick Audit Snapshot on VDA Transactions<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Minimum Documents Every VDA Assessee Should Maintain: Wallet list, exchange statements, Form 26AS, AIS, transaction register, FMV valuation records, TDS reconciliation, Schedule VDA reconciliation, DeFi income records, and carbon credit classification note (where applicable).<\/p>\n<p>A Section 44AB VDA audit should be capable of tracing every digital asset transaction from the wallet\/exchange level \u2192 books of account \u2192 tax computation \u2192 Schedule VDA \u2192 Form 3CD disclosures<\/p>\n<div>\n<p>Section 44AB VDA audit should be capable of tracing every digital asset transaction from the wallet and exchange level to the books of account, tax computation, Schedule VDA, Form 3CD disclosures, and the final Income Tax Return with a complete and verifiable audit trail.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>ICAI Guidance on Auditors Examining VDA Transactions The ICAI Exposure Draft expects auditors to examine VDA transactions through existing Form 3CD clauses and proposed VDA-specific disclosures. The objective is to ensure that crypto, NFTs, tokenized carbon credits, and DeFi transactions are properly reported and reconciled. Form 3CD Clause-by-Clause Verification for VDAs Form 3CD Clause Requirement &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[117],"tags":[10529],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/32797"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=32797"}],"version-history":[{"count":6,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/32797\/revisions"}],"predecessor-version":[{"id":32805,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/32797\/revisions\/32805"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=32797"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=32797"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=32797"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}