CBDT investigates tax evasion through crypto assets
NEW DELHI
:
Central Board of Direct Taxes (CBDT) is presently investigating tax evasion and laundering of unaccounted income by high-risk persons through investment in crypto currency, a person informed about the development said on Friday.
The direct tax authority identified persons and entities which dealt in virtual digital assets (VDA) but have failed to comply with the Income Tax Act, for verification, said the person who spoke on condition of not being named.
Data analytics has shown that a large number of persons have violated provisions of the law by not filing schedule VDA in income returns and by offering tax on the income earned at lower rate or by claiming cost indexation, the person said.
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Gains from transactions in virtual digital assets like crypto currencies are taxed at a flat 30% without any set off for past losses and without indexation benefit—adjustment of costs to take inflation into account—because these digital assets are considered distinct from traditional capital assets.
The tax provision does not allow deduction of any expense except the cost of acquisition.
In addition to the 30% flat tax rate, the applicable cess and surcharges are also levied on these. Also, loss from virtual digital asset investment or trading is not allowed to be set off against any other income.
Voluntary disclosure push
The government introduced the new tax regime for virtual digital assets in the Finance Act of 2022 that provided for the 30% tax without any set-off for losses and without deductions other than cost of purchase. The new regime also provides for a tax deducted at source (TDS) of 1% tax on payment for transfer of virtual digital asset to a resident.
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The Income Tax department has recently sent e-mails to thousands of persons to review their tax returns and update if any income on account of virtual digital asset transactions have not been properly declared, the person said.
Income tax returns filed by taxpayers is being verified with the tax deducted at source returns filed by the Virtual Asset Service Providers (VASPs) popularly known as crypto exchanges and defaulters may be selected for further verification or scrutiny, the person quoted above said.
CBDT has recently kicked off on a new approach termed as NUDGE or Non-intrusive Usage of Data to Guide and Enable taxpayers, as a part of its 'trust first' philosophy, the person said.
This is the third Nudge campaign launched by CBDT in the last six months. Earlier campaigns were to encourage voluntary compliance on declaration of foreign assets and income by taxpayers and for withdrawal of bogus claims of deduction of donations to electoral trusts.
Also Read: Govt to launch nationwide drive to return unclaimed bank deposits, dividends and policies
Queries sent to the CBDT on Friday seeking comments for the story remained unanswered at the time of publishing. (ends) Gireesh.p@livemint.com
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