Income tax officials have been given direction to do so by the( ), an apex body of the income tax department, officials told ANI.
Officials 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 34,000 crore to Rs 1 trillion.
The official said other than crypto exchanges IT sleuths will also track the crypto transaction through reporting entities.
The 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,, firms, etc.).
The 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 transactions.
On February 2 JB, 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 returns.
Other 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 2022-23, will lead to huge tax collections as the turnover of the top 10 crypto exchanges in the country is around Rs 1 trillion, said Mohapatra.
Mohapatra said, “During our pilot project on crypto we found that they are operating on four models.”
“People 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 wrong.
“The 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.