crypto transactions: Unaccounted crypto transactions of 700 users under IT scanner

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New Del­hi: High-val­ue cryp­to trans­ac­tions of about 700 investors have come under the scan­ner of the income tax depart­ment, which is now propos­ing to issue notices to them. These indi­vid­u­als or enti­ties could face 30% tax, penal­ty and interest.

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.

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