The Central Board of Direct Taxes (CBDT) is reportedly investigating alleged tax evasion and laundering of unaccounted funds by high risk persons via investment in cryptocurrency.
A PTI report, citing data analytics, said that some investors have violated the Income Tax Act by not filing the scheduled virtual digital asset (VDA) of income tax return (ITR) “and offering tax on the income earned at a lower rate or claiming cost indexation.”
The report further said that the income tax department is verifying and matching the ITR filed by tax payers with the tax deducted at source (TDS) submitted by cryptocurrency exchanges in the country. It further added that the direct tax authority has sent emails to thousands of taxpayers asking them to recheck their ITRs and update any income earned via VDA.
According to Section 115BBH of Income Tax Act, 1961 inserted by the Finance Act, 2022, gains or income on VDA transactions are taxed at a flat 30% rate.
Inc42 has sent queries to CBDT for comments on the development. The story will be updated based on the response.
India’s Stance On Cryptocurrency
The Centre seems to be in a dilemma today when it comes to cryptocurrency. Earlier, the government was quite firm towards the digital currency as it started levying tax on the VDA gains in 2022 and also imposed TDS of 1% on every cryptocurrency transaction.
Besides, in 2023 the Financial Intelligence Unit (FIU) sent notices to nine cryptocurrency exchanges including Binance, Kucoin and Bitfinex for operating in India via offshore entities.
But things are changing.
Earlier this year, economic affairs secretary Ajay Seth said that multiple jurisdictions have changed their stance towards digital assets in terms of usage, their acceptance and importance, and underlined that virtual assets “don’t believe in borders”, and therefore, India’s stance on crypto cannot be unilateral.
Last month, the Supreme Court also pulled up the government for delaying the process of regulating the trade of cryptocurrency in India and scrutinised the Centre by stating that “the current taxation of Bitcoin trading profits at 30% implies a form of legal recognition.”
However, recently the Reserve Bank of India (RBI) Governor Sanjay Malhotra said that so far there is no new development in crypto but the Centre is concerned about it since it can hamper the financial stability and the monetary policy of the country.
The government is likely to release a detailed discussion paper on the policy framework options for crypto assets this month.
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