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.
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Bhavana is a Senior Content Writer handling the GST vertical. She is committed, professional, and has a flair for writing. When away from work, she enjoys watching movies and playing with her son. One thing she can’t resist is SHOPPING! Her favourite quote is: “Luck is what happens when preparation meets opportunity”.