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The firm, techie, and housewife behind India’s new crypto tax

cryptocurrency | IST

The firm, techie, and housewife behind India’s new crypto tax

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CNBC-TV18 illustrates three examples that led to the crypto tax announcement—there are numerous other cases. Most of these instances are concentrated in and around Bengaluru, Hyderabad, and Delhi. Sources told CNBC-TV18 that the income tax department has started taking "fresh efforts via data mining" to identify agencies, companies, individuals, etc., dealing in cryptos and concealing income.

India's crypto community was relieved cryptocurrencies were not banned but was shocked at the same time to hear Finance Minister Nirmala Sitharaman levy a 30 percent tax on all income generated via virtual digital assets. A one percent tax deducted at source (TDS) was also imposed on all virtual digital asset transfers. So, what led to this announcement?
How did crypto transactions become such a concern for the government that it felt compelled to come up with tax clarity?
Techie turned farmer behind 'crypto tax'
CNBC-TV18 dug deep, spoke to a slew of sources, and some fascinating cases came to the fore. What we are highlighting here are three startling cases the tax department investigated. These and other cases bring to the surface the urgency with which the FM acted on cryptos.
Sample this: A person, who was a techie by education and a poultry farmer by profession from Andhra Pradesh's Guntur district, was mining Ethereum at his farm. Suddenly, his bank account received a sum of about Rs 1 crore. This, according to multiple people familiar with the development, raised a red flag and tax officers started investigations.
Sources told CNBC-TV18 that the findings revealed that the techie-turned-farmer had set up a graphics processing unit to run a crypto mining rig at his farm. "This investigation took place last year, and the farmer is still under investigation even though he has paid taxes along with interest and penalty on the income concealed by him," the sources said.
Bengaluru firm, Bitcoin pay
A small technology service provider in Bengaluru started paying salaries in Bitcoins. "The employees were encashing them at a price and time suiting their requirements. Neither was the company paying any taxes nor were the employees, as there were no monetary transactions," the sources told CNBC-TV18.
The tax department got alerted when an employee suddenly had Rs 50 lakh credited into his bank account, which hardly saw any transactions. This was followed by another credit of Rs 60 lakh the next month.
Investigations revealed that the employer had made it mandatory for employees to receive salaries in the form of Bitcoins, which the company was getting for rendering tech services to a foreign client. "Again, this was a case unearthed in 2017, and, since then, the income tax department has kept a strong vigil on these kinds of activities," the sources said.
Case of the 'housewife'
Another case dates back to 2013.
A housewife had started investing family savings in cryptocurrencies and was making a good fortune. Here, too, a suspicious transaction of Rs 30 lakh—that, too, received from a foreign account—rang the alarm bell for the income tax department.
"The department immediately knew something was amiss as the woman had hardly any savings in her bank for most of the tenure since she had these accounts," the sources said.
Cases spread across country
These are only three illustrative examples showing the kind of cases the tax department found, investigated, and that alerted them to what was happening with cryptos. The sources told CNBC-TV18 there were numerous other cases, "with the majority of these instances concentrated in and around Bengaluru, Hyderabad, and Delhi". The sources also pointed out that such crypto transactions are spread across tier-3 and -4 towns and districts.
Based on these investigations "between April 2017 till December 2021", the I-T department carried out actions on individuals and crypto exchanges operating in India. "Some of them are WazirX, BTX India, Unocoin, Zebpay, Bitcipher Labs, CoinSwitch Kuber, amongst others," the sources told CNBC-TV18
The 'crypto tax'
The crypto tax proposals have caused a flutter among those who have investments in these assets and those who were looking at future investments. This is also because the FM allowed no deduction with respect to expenditure or allowance for computing such income, barring the cost of acquisition. Loss from the transfer of cryptos or any digital asset also cannot be set off against any other income.
India's income tax department has decided to step up investigations against those concealing income via sale or dealing in crypto assets, the sources told CNBC-TV18. The sources said that the tax department has started taking "fresh efforts via data mining" to identify agencies, companies, individuals, etc., dealing in cryptos and concealing income.
According to them, the tax department feels that from April 1, the provision of one percent TDS on crypto will allow the department to "actually quantify the depth of cryptos and usage of cryptos in India".
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