HomeLegal & RegulationIncome tax department seek trader info from crypto exchanges

Income tax department seek trader info from crypto exchanges

Made gains in the recent crypto bull run? It is advisable to disclose the gains in your income tax returns. The tax department has reportedly sought trader details from the exchanges to bring gains made during the year long bull run to the tax net. As first reported by Economic Times, the IT department has sent notices to at least three crypto exchanges, asking them to share ledger entries to find out the price, time of purchase and sale, and gains made by a trader.

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A similar activity was undertaken in FY 2017-18. The department then has sent notices to around 4-5 lakh HNIs. 2017 was a crypto frenzy year, with bitcoin for the first time touching $20,000. At the time, the department conducted surveys under Section 133A of the IT Act, 1961.

Unlike securities, crypto trading does not involve brokers and the department has to approach crypto exchanges as a sole source of information. In security transactions, the department can compare the data submitted by brokers with the financials of the assessee.

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Taxation of crypto assets is still a grey area. Experts say profits from the sale of crypto assets can be taxed as business income if traded frequently, or as capital gains if held for investment purposes. However, there are no guidelines issued by the department on how the taxing will be done.

Answering a question in Rajya Sabha in March 2021, the Ministry of Finance said the gains arising from the transfer of crypto assets are liable to tax under a head of income, depending upon the nature of holding of the same. The ministry said no data is maintained on cryptocurrency earnings of Indians as there is no provision in the income tax return to capture data on earnings arising from crypto assets.

Effective from April 2021, companies in India are required to disclose profit or loss on transactions involving cryptocurrency, the amount of crypto assets held on the reporting date, and deposits or advances from any person for the purpose of trading or investing in crypto Currency/ virtual currency.


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