Income Tax Department has initiated investigation tax evasion and laundering of unaccounted income by high-risk persons through investment in crypto currency for the Assessment Year 2024-25 (Fiscal Year 2023-24), sources said.
“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,” a source said. ITRs filed by taxpayers is being verified with TDS returns filed by the Virtual Asset Service Providers (VASPs) popularly known as crypto exchanges and defaulters may be selected for further verification/ scrutiny. “CBDT has recently sent e mails to thousands of defaulting persons to review their ITR and update if any income on account of VDA transactions have not been properly declared,” another source added.
India calls crypto as VDA purely for taxation purpose. It is neither legal nor illegal, but earning on VDA attracts 30 per cent tax (plus cess and surcharge), irrespective of the slab of assessee. Also, each and every transaction deduction of tax (TDS) at the rate of 1 per cent on payments made on the transfer of VDAs.
This is applicable in case the value of the transaction is more than Rs 10,000 or Rs 50,000 in the case of specified persons, in a particular year. Also, the provision does not allow deduction of any expenses except 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.
According to sources, data analytics has shown that significant number of personshave violated provisions of Income Tax Act by not filing Schedule VDA of ITR and offering tax on the income earned at lower rate or claiming cost indexation.
Income Tax Department has recently embarked on a new approach termed as NUDGE (Non-intrusive Usage of Data to Guide and Enable) Taxpayers, as a part of TRUST Taxpayers FIRST philosophy. This campaign is seen as third NUDGE campaign launched by CBDT in last six months. Earlier NUDGE campaigns were on declaration of foreign assets/ income by taxpayers and withdrawal of bogus claims of deduction under section 80GGC, the second source, quoted above said.