Indore (Madhya Pradesh)
The city's traders and investors in crypto currencies have come on the radar of the Income Tax Department. For the first time, the department has served notices to several such traders and sought explanations about the amount invested and income earned from crypto trade.
Crypto currency deals are unregulated across the globe, except few tiny countries. Thus, it has become a sort of organised international hawala trade also. Therefore the department has started focusing on such traders and investors.
‘In the last few days, the Income Tax Department has served notices under section of 148A of Income Tax Act to those people who traded in crypto currencies in 2017-18. In these show-cause notices traders\investors have been asked to explain the total value of the transaction and also why this transaction amount should not be taxed as your income?
Also, they have been asked to establish the source of the initial investment made to buy crypto currency.
'If the reply to this notice is not found satisfactory, a detailed inquiry will be conducted under section 148 and the amount of tax evaded will be levied - 77% along with a 10% penalty and additional interest. Many people have made good profits in the past years in bitcoin and other crypto currencies’ official sources informed this correspondent.
CA Pankaj Shah, former chairman of the CA branch, informed that the tax and penalty can be saved by giving detailed answers. If the taxpayer has transferred the initial amount invested in the crypto wallet from the bank and has paid tax on the amount in the bank, then the investment will not be taxed again.
If there is a profit from the purchase and sale of crypto currency, then it will have to be taxed at 30% and if there is a loss, then this loss will not be set off. If the crypto currency is sold after holding it for three years, then it will be taxed at 20% and it will be considered as capital gains. From April 1st, profits made in crypto currency will attract a flat 30% Income Tax, without any exemption. The loss caused by the trade will not be affected by other income. Also, on purchase of crypto currency of more than Rs.10,000 from company and firm or audited taxpayer and Rs 1% TDS will be deducted on purchase of 50000 cryptos.
Also, there will be a possibility of GST for selling crypto currency more than the exemption amount.
There is strong need to regulate crypto trade
Talking about crypto trade, senior CA Shah said that nowadays this unregulated crypto trade is taking root in the Indian economy and posing serious challenges before it. Crypto trade does not fall under RBI or FEMA regulations. Therefore, there is fear that it’s going to be a tool of international hawala trade. Thus the government must check this.