Crypto transactions of 700 investors under IT Scanner; expected to be taxed and penalised by 30%

The Income-tax department is now planning to issue letters to around 700 investors whose high-value crypto transactions have come under scrutiny. These persons or entities may be subject to a 30% tax, as well as penalties and interest. The majority of these cases, according to tax officials, involved individuals who either failed to indicate crypto earnings on their tax forms or did not file taxes at all.

According to tax officials, the vast majority of these cases included people who either failed to report their cryptocurrency earnings on their tax forms or did not file any taxes at all.

“We have a long list of persons who have been transacting in crypto assets without paying tax. Initially, (we) shortlisted roughly 700 transactions with a substantial tax burden”, According to a senior official of the Central Board of Direct Taxes (CBDT).

Interestingly, the list includes students and housewives who have never filed taxes, in addition to high net worth people (HNIs), non-resident Indians (NRIs), and startups. The department is also looking into whether their names were used to avoid paying taxes.

It’s worth noting that in the Budget 2022-23, the government proposed a 30% tax on revenue from cryptocurrencies like Bitcoin and Ethereum, as well as other digital assets. Finance Minister Nirmala Sitharaman, on the other hand, stated that losses from the sale of digital assets cannot be adjusted against other sources of income.

According to report, there have been cases where investors have made gains of more than Rs.40 lakh but have either not filed returns or filed returns with zero income.

Separately, CBDT Chairman JB Mohapatra told the daily last month that many cryptocurrency investors were not declaring income and that the tax administration had accumulated enough information on them. The department will take action after March 31st, according to the statement.

The government has also suggested amending the Income Tax Act to include Section 194S, which would allow for a 1% tax deduction on payments made for crypto transactions. This is being done in order to keep track of the country’s cryptocurrency transactions.