Income tax officials said most of these cases involved users who have either skipped mention of crypto gains in tax returns or haven’t filed returns at all.
“We have a long list of people who were transacting in crypto assets but were not paying tax. Initially, (we) have shortlisted about 700 transactions, where tax liability is very high,” a senior Central Board of Direct Taxation (CBDT) official told ET.
Interestingly, apart from high net-worth individuals (HNIs), non-resident Indians (NRIs) and startups, the list also includes students and housewives who have never filed returns. The department is also examining whether their names had been used to evade the tax net.
In her February 1 budget, finance minister Nirmala Sitharaman proposed a 30% tax on capital gains from crypto currencies, crypto assets from the next fiscal year. The budget further stated that a flat tax would apply irrespective of how long an individual has possessed the virtual digital asset.
Officials added that there are instances where gains have exceeded Rs 40 lakh, yet the user has either not filed returns or filed returns with zero income.
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In an interview to ET last month, CBDT chairman JB Mohapatra had said that a large number of investors in crypto currency had not been declaring income and the income tax department has collected enough data on them. He had maintained that the department will initiate action after March 31.
Tax officials said that apart from imposing levies under the new rules for crypto assets as announced in the budget, the department may also seek penalties, which may go up to 50% over and above the tax.
Divergent practices have been followed in the treatment of crypto transactions, with some declaring income as capital gains, others as business income.
However, experts said the problem is only when there is no mention of gains on account of such assets.
“I do not think there is a problem with crypto transactions where tax returns have been filed mentioning crypto gain or loss. But cryptocurrency transactions will attract tax as per the new tax regime if tax authorities detect any unaccounted transaction after April 1,” said Sudhir Kapadia, national tax leader, EY. He also referred to penalties as decided by tax officials.