IT Department Prepares To Tax 30% Of Profits Made On Cryptocurrency Transactions

Tax officials were ordered to do so by the Central Board of Direct Taxes (CBDT), a top arm of the income tax department, officials told the news agency. ANI.

A senior Finance Ministry official said, “Our officers will keep a close eye on cryptocurrency exchanges, of which there are around 40, where major coin transactions like Bitcoin, Etherium take place.”

They further stated that out of the 40 cryptocurrency exchanges, 10 mainly deal in the sale and purchase of cryptocurrencies and their turnover is between 34,000 crore to 1 trillion.

The official said that apart from crypto exchanges, computer detectives will also track the crypto transaction through reporting entities.

The new cryptocurrency tax regime will fall under Section 285BA and Subsection (k) of the IT Act. Where under Rule 114 E persons are required to report the prescribed financial statements in the Statement of Financial Transactions (SFT), any person responsible for the audit under Section 44AB (such as individuals, HUFs, companies, etc.).

The official said that by July 1, 2022, when the department begins deducting 1% withholding tax (TDS) on crypto transactions, it will become easier for the department to track crypto transactions.

On February 2, JB Mohapatra, Chairman of the Central Board of Direct Taxes (CBDT), in an interview with ANI, said that it is very difficult to track and trace these crypto investors. The TDS provision will now help track and trace people who are in this business and making a profit, but not reporting it on their tax returns.

In addition to tracking through TDS, they can be tracked through reporting entities. Imposing a 30% tax on proceeds from digital assets, as announced in the Union Budget 2022-23, will lead to huge tax collections as the turnover of the top 10 crypto exchanges of the country is approximately 1 trillion, said Mohapatra.

Mohapatra said, “During our crypto pilot, we found that they worked on four models.”

“People trade in crypto but they don’t file it on their tax returns. These crypto traders filing their tax returns have no indication of crypto trading. The third model, we found that there are crypto trading details but their estimates of selling and buying shares or cryptos are wrong.

“The fourth model shows details of crypto profits on their tax return, but they show it as income from other sources, capital gains income, or business income. In suspected cases, tax returns were not filed. This is very problematic for us,” the CBDT president said.

Meanwhile, the government had said earlier that 95.86 crore was recovered from 11 cryptocurrency exchanges for Goods and Services Tax (GST) evasion.

The total amount includes penalty and interest.

Zanmai Labs (WAZIRX), Coin DCX, CoinSwitch Kuber, Buy Ucoin, UnoCoin and Flitpay were among the exchanges implicated in GST evasion cases.

On 49.18 crore was recovered from Zanmai Labs (WAZIRX), 17.1 crore of Coin DCX, and 16.07 crore from CoinSwitch Kuber.

With the contributions of the agency

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IT Department Prepares To Tax 30% Of Profits Made On Cryptocurrency Transactions

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