Income Tax Department

Income Tax Department prepares to tax 30% of profits made on crypto transactions

Crypto

As the 30% ‘crypto tax’ announced in the Union Budget goes into force tomorrow, the Income Tax Department will be closely monitoring every transaction on crypto exchanges.

The Central Board of Direct Taxes (CBDT), an apex authority of the income tax department, directed the tax authorities to do so, officials said.

“Our officers will maintain a tight check on the Cryptocurrency exchanges, which are roughly 40 in number, where transactions in big currencies like Bitcoin, Etherium are going on,” a senior Finance Ministry official stated.

They also stated that, among the 40 cryptocurrency exchanges, ten are primarily involved in the selling and acquisition of cryptocurrencies, with a turnover ranging from 34,000 crores to 1 trillion. The official stated that, in addition to crypto exchanges, IT sleuths will watch crypto transactions through reporting companies.

The new cryptocurrency tax framework will be governed by Section 285BA and Subsection (k) of the IT Act. Where people are obliged to submit the prescribed financial statements in the statement of financial transactions (SFT) under rule 114 E, every person who is liable for audit under section 44AB is also required to report the prescribed financial statements in the SFT (Like Individuals, HUF, firms, etc.).

The source stated that when the department begins deducting 1% of Tax Deducted at Source (TDS) on crypto transactions on July 1, 2022, it will be easier for the agency to trace crypto transactions.

In an interview on February 2, JB Mohapatra, Chairman of the Central Board of Direct Taxes (CBDT), stated that monitoring and identifying these crypto investors is extremely tough. The TDS provision will now aid in the tracking and tracing of individuals who are engaged in this industry and generating profits but are not reporting them on their income tax filings.

Meanwhile, the government previously stated that 95.86 crores had been collected from 11 bitcoin exchanges for GST avoidance (GST). The total sum includes both the penalty and the interest.

Among the exchanges engaged in GST evasion instances were Zanmai Labs (WAZIRX), Coin DCX, CoinSwitch Kuber, Buy Ucoin, UnoCoin, and Flitpay. Zanmai Labs (WAZIRX) recovered around 49.18 crores, Coin DCX recovered 17.1 crores, and CoinSwitch Kuber recovered 16.07 crores.