Investigation of Cryptocurrency Trades in India
The Indian tax department is stepping up its efforts to investigate over 400 affluent individuals suspected of concealing cryptocurrency trades on Binance, the largest digital currency exchange worldwide. This initiative targets individuals who have allegedly evaded taxes on crypto earnings between the fiscal years 2022-23 and 2024-25, with many not declaring their digital assets managed through Binance wallets.
Tax Authority Actions and Regulations
The Central Board of Direct Taxes (CBDT) has mandated its investigative teams across multiple cities to provide updates on their findings by October 17. Reports suggest that numerous traders have turned to offshore platforms such as Binance, seeking relief from India’s stringent crypto tax laws. According to guidelines reported by The Economic Times, these laws impose a 1% tax on the sale of digital assets at source, along with a profit tax ranging from 33% to 42%, depending on the specific tax classification.
Investigative Focus
Investigators within the tax office are delving into peer-to-peer transactions facilitated via Binance, where local buyers and sellers interact, with payments processed through Indian bank accounts, Google Pay, or cash transactions.
Consequences of Non-Compliance
Siddharth Banwat, a Mumbai-based chartered accountant, indicated that the tax authorities possess the power to issue summons to verify accurate reporting during income tax submissions. Taxpayers who have aggressively minimized their reported income may amend their filings for additional fees.
This enforcement action is indicative of India’s enhanced regulatory framework governing virtual digital assets, now fortified by the tax authorities’ access to transaction data from various cryptocurrency exchanges. This advancement allows for the detection of discrepancies and previously unreported income.
Advice for Taxpayers
Ashish Karundia, who runs Ashish Karundia & Co., cautioned that the anonymity traditionally enjoyed by crypto traders is diminishing. Neglecting to report virtual digital assets properly could lead to a reassessment of tax liabilities, with significant penalties stipulated under Section 270A. More severely, failure to include assets on Schedule FA could invoke the Black Money Act, leading to substantial fines and even criminal prosecution.
Karundia urged taxpayers to conduct thorough reconciliations of their virtual digital asset activities and consider corrective strategies, such as filing revised returns, before compliance demands increase. If enforcement measures are heightened, it could limit taxpayers’ options for rectifying their situations.
