Government Intends to Bring Cryptocurrencies Under Tax Law
Tax Exemption

The government intends to amend Section 26A of the Income Tax Act and the Annual Information Regulation (AIR), which reflects data related to all taxpayer-related investments and is often known as a ‘tax passbook’. An Indian who trades or invests in cryptocurrencies via Indian platforms might come under the tax law. There has been a suggestion to include words such as crypto assets, digital currency, and cryptocurrency in a few parts of the Income Tax Act. As a taxpayer filing tax returns, you will need to disclose your income via cryptocurrency trading or investment specifically.

AIR handles disclosures of investments worth Rs 2 lakh and more in mutual funds, jewellery, fixed deposits and recurring deposits. There is fear as the tax department cannot legally ask banks to disclose cryptocurrency transactions initiated by customers since the asset is not defined under the Income Tax Act.

After such an amendment is done, the tax department will obtain the transaction details of individuals via banking channels. The government is keen on amending the foreign asset disclosure norms so that an Indian will need to declare if they are holding cryptocurrencies overseas. As per the current regulations, Indians must reveal all the assets they possess or their income during the year via foreign trusts or real estate.

After the amendment, taxpayers who do not disclose their crypto investments or transactions might face punitive action. Banks will need to disclose data regarding crypto transactions with the tax department following the amendment.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in

You May Also Like

Taxation of dividend income received on or after 1 April 2020 (FY 2020-21)

You may receive a dividend from your equity or mutual fund investments.…
Gold Jewellery

24K Gold Rate in India for November 2019: Week 4

The fourth week began with the gold rate in India holding at…
GSTR-9

CBIC has notified an extension of two months to various GST compliance

The government of India has notified yet another extension for the completion…
Tax Exemption

CBDT issues guidelines under section 194Q

The income tax department issued a circular dated 30th June 2021 laying…