Crypto income on IT radar; dept send emails to individuals
The Income Tax Department has issued notices to thousands of individuals across the country who failed to report income from cryptocurrency transactions in their tax returns.
The Income Tax Department has sent a communication to thousands of individuals who have undertaken cryptocurrency transactions but failed to reflect this income in their returns, official sources said Friday.
These transactions pertain to assessment years 2023-24 and 2024-25, they said.
The department and its policy-making body, the Central Board of Direct Taxes (CBDT), suspect tax evasion and money laundering by certain "high-risk" people who are potentially using "unaccounted" income to invest in virtual digital assets (VDAs), commonly known as cryptocurrency.
Sources told PTI that the I-T Department has sent e-mails to thousands of defaulting people nudging them to file an updated Income Tax Return (ITR) if any income on account of crypto transactions has not been declared or mis-declared by them.
This communication is part of the NUDGE (Non-intrusive Usage of Data to Guide and Enable) campaign undertaken by the department with a philosophy of "trust taxpayers first" philosophy.
According to section 115BBH of the Income Tax Act (provided by the Finance Act of 2022), a flat tax rate of 30 per cent (plus applicable surcharge and cess) is levied on income from crypto transfers. The provision does not allow deduction of any expenses except the cost of acquisition.
Further, set-off of losses from crypto investment or trading is not allowed to be set off against any other income or for carry forward to subsequent years.
Sources indicated that data analytics done by the tax department has shown that a "significant" number of people have not filed the Schedule VDA (for crypto) in their ITRs, and such people were offering tax on the income earned at a lower rate or claiming cost indexation.
It is understood that the ITRs filed by taxpayers are being verified by the department with tax deducted at source (TDS) returns filed by various cryptocurrency exchanges (Virtual Asset Service Providers), and the defaulters may be selected for further "verification or scrutiny".
This is the third in the NUDGE series campaign undertaken by the I-T Department and the CBDT, where they gently remind taxpayers about their liabilities.
The previous two were related to seeking correct declarations on foreign assets and income by taxpayers and withdrawal of bogus claims of deduction under section 80GGC of the I-T Act.