Crackdown Begins On Crypto Investors In India: Heavy Penalty, 30% Tax & Interest To Be Imposed
The Income Tax Department is looking into high-value crypto transactions of 700 investors and could serve them notices for non-payment of taxes.
Failure Of Disclosure
Income tax officials said that these 700 investors have either failed to file their tax return or declare their crypto income in their return, hence inviting action.
A senior official has said that the department has a long list of people who were transacting in crypto assets but were not paying tax.
Initially they shortlisted about 700 transactions, where tax liability is very high.
Actions taken against them could include 30% tax, penalty and interest.
Apart from imposing levies as per the new rules for crypto assets, the department may also impose penalties which can go up to 50% over and above the tax.
The new rules were introduced in the Feb 1 Budget by finance minister Nirmala Sitharaman.
She proposed a 30% tax on capital gains from crypto currencies, assets from the next fiscal year.
A flat tax will also be applicable regardless of how long a person has possessed the virtual digital asset.
Incomplete Or Failure Of Filing Return
Officials have spoken of instances where gains exceeded Rs 40 lakh but the user either did not file returns or filed returns with zero income.
The department will initiate action after March 31.
Most of these cases involved users who have either failed to mention crypto gains in tax returns or haven’t filed returns at all.
Using Others’ Names To Evade
The 700 people include, aside from high net-worth individuals (HNIs), non-resident Indians (NRIs) and startups, students and housewives who have never filed returns.
The department is investigating whether the names of these students and housewives have been used to evade the tax net.
Divergent practices have been used for crypto transactions.
Some declare the income as capital gains while others as business income.
New Tax Regime
However, issues arise only when the gains on account of such assets are not disclosed.
If the person has mentioned their crypto gains or losses in their tax returns, there should be no problem.
However, such transactions will attract tax as per the new regime if tax authorities detect any unaccounted transaction after April 1, said Sudhir Kapadia, national tax leader, EY.