Cryptocurrency Investment: The Central Board of Direct Taxes (CBDT) is investigating suspected tax evasion and laundering of unaccounted income by high-risk individuals through investment in cryptocurrency. Such entities and individuals engaged in virtual digital asset (VDA) transactions, having failed to comply with the Income-tax Act, 1961, have been identified for verification. Zee Business learned from reliable sources that the CBDT has recently sent emails to thousands of defaulting individuals to review their income tax returns (ITRs) and update them if any income on account of VDA transactions has not been properly declared.
In other words, the taxman has sent a communication to thousands of individuals who have made crypto transactions but failed to reflect this income in their returns.
Section 115BBH of the Income Tax Act, 1961, inserted by the Finance Act, 2022, prescribes a flat tax rate of 30 per cent plus applicable surcharge and cess on income from virtual digital asset transfer.
This provision does not allow deduction of any expenses except the cost of acquisition.
Further, set-off of loss from VDA investment or trading is not allowed to be set off against any other income or for carry forward to subsequent years.
Attention, crypto investors! Virtual currency income under lens
Data analytics has shown that a significant number of persons have violated provisions of the Income Tax Act by not filing Schedule VDA of ITR and offering tax on the income earned at a lower rate or claiming cost indexation.
Income tax returns (ITRs) filed by taxpayers are being verified with tax deducted at source (TDS) 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 CBDT recently embarked on a new approach, called Non-intrusive Usage of Data to Guide and Enable (NUDGE) Taxpayers, as a part of TRUST Taxpayers FIRST philosophy.
This campaign is seen as the third NUDGE campaign launched by CBDT in the last six months.
Earlier, NUDGE campaigns were on the declaration of foreign assets or income by taxpayers and the withdrawal of bogus claims of deduction under Section 80GGC of the Income Tax Act.
