The head of the Central Board of Direct Taxes (CBDT) in India said the recent announcement of a 30% tax on crypto holdings doesn’t necessarily make the crypto trade legal in India.
The finance minister of India announced a 30% tax on crypto holdings during the budget session on Feb. 1, triggering several headlines on the lines of “India legalizes crypto” however, CBDT chief JB Mohapatra aimed at debunk these misconceptions.
The budget announcement to tax “virtual digital assets” or cryptocurrencies will help the income tax department gauge the “depth” of this commerce in the country, know the investors and the nature of their investments and it “Attaches no legality” to these transactions, said the chairman of the Central Board of Direct Taxes (CBDT), JB Mohapatra.
He said it was “the right time” for the tax authorities to enter this arena, on which Finance Minister Nirmala Sitharaman said the government was undertaking a stakeholder consultation to develop a national policy and regulator. in the next few days.
Mohapatra in a post-budget presser said that the new crypto tax would help the income tax department measure the depth of the digital currency market in the country. He also stressed that imposing a tax on the nascent crypto market doesn’t necessarily legalize its trade in the country. He explained:
“The crypto trade or the digital assets transactions do not ipso facto become legal or regular just because you have paid taxes on that.”
Mr. Mohapatra explained that when an entity reports a profit or surplus on digital commerce, it must also disclose where it got the money to invest from and, if the investment is appropriate and justified, the surplus. will then be taxed.
“Taxation will also help us know if the investment is contaminated or illicit if it puts unaccounted income or if it is a ‘Benami’ of someone else, then the consequences will follow,” he did declare.
“We want to build and map the full depth of this market through the provisions of the TDS. We want to look at each of the transactions, who is investing, and where he/she is investing? That one percent of the TDS will give us an idea of the depth of this market,” he said.
The budget proposed a 1% TDS on payments to virtual currencies in excess of Rs 10,000 per year and taxation of such gifts in the hands of the recipient. The threshold limit for TDS would be Rs 50,000 per annum for specified persons, which includes individuals or Hindu undivided families (HUF) who are required to have their accounts audited under the IT Act.
Further, no deduction for any expense or allowance will be permitted.
“It has been said that there are 10 crore investors (in crypto trading) so we want to see if it is 10 crore or 1 crore. We want to see if profits are reported, whether they are real or just fictitious. to build the market. We want to enter the market, understand how it works and also remove opacity and bring transparency to transactions,” Mr. Mohapatra said.
“I will not be right to quote this data in order to have a pan-India estimate of the depth of the (crypto) market,” the chairman said.
Tax department officials, however, say they have “unconfirmed or anecdotal entries” to suggest that there are around 40 crypto exchanges in the country and that the annual turnover of this unregulated trade (since 2017) ranges from Rs 30,000 crore to Rs 1 lakh crore per annum.