The new tax regime for cryptocurrency will come under section 285BA and sub-section (k) of the IT Act.
new Delhi:
The Income Tax Department will keep a close watch on every transaction on crypto exchanges as the 30 per cent ‘crypto tax’ proposed in the Union Budget comes into force from April 1, 2022.
The Central Board of Direct Taxes (CBDT), the apex body of the Income Tax Department, has directed the Income Tax officials to do the same.
“Our officials will keep a close watch on cryptocurrency exchanges, which number around 40, where major coins like bitcoin, ethereum are transacting,” said a senior finance ministry official.
Officials told ANI that out of the 40 cryptocurrency exchanges, 10 are majorly dealing in the sale and purchase of cryptocurrencies and their turnover is between Rs 34,000 crore and Rs 1 trillion.
The official said that apart from crypto exchanges, IT officials will also track crypto transactions through reporting entities.
The new tax regime for cryptocurrency will come under section 285BA and sub-section (k) of the IT Act. Where under rule 114E, individuals are required to report the financial statements set out in the Statement of Financial Transactions (SFT), any person who is subject to audit under section 44AB (such as individual, HUF, firm, etc.) is liable.
The official said that by July 1, 2022, when the department will start deducting 1 percent tax deducted at source (TDS) on crypto transactions, it will become easier for the department to track crypto transactions.
On February 2, JB Mohapatra, Chairman, Central Board of Direct Taxes (CBDT) said in an interview to ANI that it is very difficult to track and trace these crypto investors. TDS provision will now help to track and trace people who are in this business and making profits but are not filing it in their income tax returns.
Apart from being traced through TDS, they can be tracked through reporting entities. Mohapatra said that the imposition of 30 per cent tax on income of digital assets announced in the Union Budget 2022-23 will result in huge tax collection as the country’s top 10 crypto exchanges have a turnover of around Rs 1 trillion.
“During our pilot project on crypto, we found that they are working on four models,” Mohapatra said.
“People are trading in crypto but they are not filing it in their income tax returns. Those crypto traders filing their income tax returns have no indication of crypto trading. Third model, we found that the details of crypto trading But their guesses about selling and buying stocks or crypto are wrong.
“The fourth model shows details of crypto profits in their income tax returns but they show it as income from other sources, income from capital gains, or income from business. In suspicious cases, the income tax return was not filed. is problematic for us,” the CBDT chairman said.