Income Tax Department Raises Alarm on Crypto Risks and Virtual Digital Assets
Income Tax Department Highlights Crypto Risks
The Income Tax (I-T) Department has officially flagged significant concerns regarding virtual digital assets (VDAs) like cryptocurrencies. Following the Reserve Bank of India's suit, the I-T department presented to the Parliamentary standing committee on finance, addressing the potential risks posed by these digital assets.
Concerns Raised by Tax Officials
- Tax officials emphasized that the anonymous, border-less, and rapid transactions associated with crypto make regulation challenging.
- They stated that offshore exchanges and decentralized platforms complicate the detection of taxable income.
- The lack of information sharing between jurisdictions further hinders tax recovery efforts.
Last year, the department proactively sent 44,000 emails to individuals for failing to report their cryptocurrency transactions. This action mirrors RBI's earlier stance, asserting that VDAs threaten financial stability in India.
Heavy Taxation Regime on Cryptos
- Introduced a 1% tax deducted at source (TDS) on crypto transactions above INR 10,000.
- Enforced a 30% capital gains tax on cryptos in 2022.
- Collected INR 705 Cr in taxes from VDA income between FY23 and FY24.
Despite heavy lobbying for greater acceptance of cryptocurrencies, India remains cautious, reflecting a stringent taxation strategy and regulatory scrutiny against non-compliant exchanges.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.