Indian tax authorities have begun active measures against individuals and businesses evading taxes on cryptocurrency earnings, particularly Bitcoin and Ethereum.
Overview of Tax Authority Actions
The Central Board of Direct Taxes (CBDT) has initiated investigations into tax evasion and money laundering involving digital assets. This action follows observations that most individuals were not reporting their crypto profits.
Taxation of Crypto Earnings
Profits from cryptocurrencies are taxed at a flat rate of 30% under Section 115BBH of the Income Tax Act. Despite this high rate, many individuals evade tax payments.
New Tax Rules and Their Implications
The recently updated Prevention of Money Laundering Act (PMLA) requires dealers and exchanges to conduct Know Your Customer (KYC) checks and keep records of user activities and transactions. This will enable the government to closely monitor crypto trading activities. In addition to the 30% tax on profits, there is also a 1% Tax Deducted at Source (TDS) on every crypto transaction.
In light of new tax regulations and increased monitoring by authorities, individuals evading taxes on cryptocurrency may face serious consequences.
