IT dept prepares to tax 30 per cent profits made on crypto transactions

The Income Tax Department will keep a close eye on every transaction on crypto exchanges as the 30 per cent crypto tax proposed in the Union Budget comes into effect from 1st April 2022Income tax officials have been given direction to do so by the Central Board of Direct Taxes CBDT an apex body of the income tax department officials told ANIA senior Finance Ministry official said Our officers will keep a close eye on the Cryptocurrency exchanges which are around 40 in number where transactions in major coins like Bitcoin Etherium are going onOfficials told ANI that out of 40 cryptocurrency exchanges 10 are majorly dealing in the sale and purchase of cryptocurrencies and their turnover is between Rs 34000 crore to Rs 1 trillionThe official said other than crypto exchanges IT sleuths will also track the crypto transaction through reporting entitiesThe new tax regime of cryptocurrency will fall under section 285BA and sub section k of 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 who is liable for audit under section 44AB Like Individuals HUF firms etcThe official said that by July 1 2022 when the department will start deducting 1 per cent Tax Deducted at Source TDS on crypto transactions it will become easier for the department to track crypto transactionsOn February 2 JB Mohapatra Chairman Central Board of Direct Taxes CBDT in an interview to ANI said that tracking and tracing these crypto investors is very difficult The TDS provision will now help in tracking and tracing the people who are in this business and making profits but are not filing it in their income tax returnsOther than tracing through TDS they can be tracked through reporting entities The imposition of 30 per cent tax on proceeds of digital assets as announced in the Union Budget 202223 will lead to huge tax collections as the turnover of the top 10 crypto exchanges in the country is around Rs 1 trillion said MohapatraMohapatra said During our pilot project on crypto we found that they are operating on four modelsPeople are trading in crypto but they are not filing it in their income tax returns Those crypto traders filing their income tax returns have no indication of crypto trading The third model we found that there are details of crypto trading but their estimates of stock sale and purchase or cryptos are wrongThe fourth model shows the details of crypto profits in their income tax return but they show it as income from other sources income from capital gains or income from the business In suspicious cases income tax returns were not filed This is very problematic for us the CBDT chairman said aThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever