The Income-Tax (I-T) Department’s current action may add to the worries of Indian investors at a moment since most cryptocurrencies have lost their value owing to the continuing downturn. To tax the profits gained during the bull run, the I-T department has required trading records from all crypto exchanges in India.
According to a report, the I-T department has given warnings to three exchanges requesting all ledger entries in order to investigate the price, timing, and volume of digital coins sold by the exchanges.
It’s not the first time the IRS has asked for such documentation from marketplaces. When Bitcoin hit an all-time high earlier this year, similar emails were sent out.
As the agency has turned faceless, a top tax officer told ET that it is a standard operation to ensure if everything is in order.
The I-T administration has also requested information including the issuer’s financials, but the objective appears to be primarily to check the details of traders because the government already has information on exchanges, according to a report quoting an official from one of the exchanges.
But unlike the stock market, where transactions are made through middlemen, cryptocurrency buy and sell orders are put directly on the exchange platform, making exchanges the only source of such data.
Cryptocurrency dealers are not permitted to withdraw funds and deposit the profits into their trust funds in order to buy when prices fall. According to another cryptocurrency official, this might result in some profits being tax-free. The department may also wish to verify that all taxes have been paid once the sale funds have been sent to the dealer’s checking account.