The Central Board of Direct Taxes (CBDT) is investigating instances of tax evasion and laundering of unaccounted income through cryptocurrency investments by high-risk individuals, income tax department sources stated.
Entities and individuals engaged in Virtual Digital Asset (VDA) transactions, who have failed to comply with the provisions of the Income-tax Act, 1961, have been identified for verification, the sources said. It is understood that the CBDT has recently issued emails to thousands of such defaulting taxpayers, urging them to review their income tax returns (ITRs) if any income from VDA transactions has not been properly disclosed.
Section 115BBH of the Income-tax Act, 1961—introduced through the Finance Act, 2022—imposes a flat 30% tax (plus applicable surcharge and cess) on income arising from the transfer of VDAs. The provision does not permit any deduction of expenses, other than the cost of acquisition. Further, the set-off of loss from VDA investment or trading is not allowed to be set off against any other income or for carry forward to subsequent years.
Data analytics has shown that a significant number of persons have violated provisions of the Income Tax Act by not filing Schedule VDA of ITR and offering tax on the income earned at a lower rate or claiming cost indexation, sources said.ITRs filed by taxpayers are being verified with TDS returns filed by the Virtual Asset Service Providers (VASPs), popularly known as crypto exchanges, and defaulters may be selected for further verification/ scrutiny.
CBDT has recently embarked on a new approach termed as NUDGE (Non-intrusive Usage of Data to Guide and Enable) Taxpayers, as a part of the TRUST Taxpayers FIRST philosophy. This campaign is seen as the third NUDGE campaign launched by CBDT in the last six months. Earlier NUDGE campaigns were on the declaration of foreign assets/ income by taxpayers and withdrawal of bogus claims of deduction u/s 80GGC.