2 days ago
I-T Department sends notices to ‘thousands' for not paying tax on crypto transactions
The Income Tax Department has sent notices to 'thousands' of taxpayers who have not paid tax on the cryptocurrency transactions, according to sources in the Central Board of Direct Taxes (CBDT).
In 2022, the government had amended the Income Tax Act, 1961, to prescribe a 30% tax, in addition to an applicable surcharge and cess, on income arising from the transfer of virtual digital assets (VDAs), conventionally called crypto currencies or crypto assets. The provision did not allow losses to be set off against profits, and also did not allow the deduction of any expenses except the cost of acquisition.
CBDT is investigating tax evasion and laundering of unaccounted income by high-risk persons through investment in crypto currency. Such entities and individuals which are engaged in Virtual Digital Asset (VDA) transactions and have failed to comply with the Income-tax Act, 1961 have been identified for verification.
'CBDT has recently sent emails to thousands of defaulting persons to review their income tax returns and update if any income on account of VDA transactions that have not been properly declared,' the source in the CBDT said.
It is learnt that data analytics by the Income Tax Department has found that a 'significant number of persons' have violated provisions of Income Tax Act by not filing the relevant VDA-related schedule in their returns and paying tax on the income earned at lower rate, or claiming cost indexation.
'The ITRs filed by taxpayers are being verified with tax deducted at source (TDS) returns filed by the Virtual Asset Service Providers (popularly known as crypto exchanges),' the source added. Defaulters may be selected for further verification and scrutiny, they said.
These crypto-related notices sent to the taxpayers are part of a new approach being followed by the CBDT under its Non-intrusive Usage of Data to Guide and Enable Taxpayers (NUDGE Taxpayers) programme. Previous attempts at similar 'nudges' were on the declaration of foreign assets or income by taxpayers and the withdrawal of bogus claims of deduction under Section 80GGC.
