Taxman asks crypto bourses for trade info – Economic Times

The tax office has sought all trade details from cryptocurrency exchanges, along with their financials, to catch profits made during the year-long bull-run in the tax net.

A fortnight ago, the income tax (I-T) department sent notices to at least three exchanges, asking them to share all ledger entries to find out the price, time, and number of coins sold by a trader.

The tax department had called for similar information in December 2017 when Bitcoin, the most widely known cryptocurrency, had touched a new high.

“It’s a routine action to collect information and ascertain the activity – particularly, as we have become faceless…to check whether things are okay,” said a senior tax official. For a large number of taxpayers, the department has migrated to a ‘faceless assessment’ process through electronic mode.

“The department has also asked us to give the financials of the exchange. But we think the focus may be on the users (i,e, traders) as they already have information on exchanges,” said an executive of one of the exchanges.

For crypto trades, exchanges are the sole source of such information. In stock market trades, the department can compare financial transaction details submitted by brokers with respective returns filed by investors. However, unlike equity trades, cryptocurrency transactions require no broker or intermediary – with traders placing buy or sell orders directly on the exchange platform.

“Many crypto traders may not withdraw the money and transfer the sale proceeds to their bank accounts. They may let the money lie with the exchange so that they can buy as soon as crypto prices dip. In the process, some profits may go untaxed,” said another exchange official. “Also, I-T may want to check whether the full tax is being paid after funds received from sale are moved to a trader’s bank account,” said the person.

Since crypto is not recognised as ‘security’ (under the Securities Contracts (Regulation) Act), the gain from crypto sale is taxed at the full income tax rate of over 30% – as against 15% tax on short-term capital gains on stock sale.

While many traders and late entrants have been hurt by volatile crypto prices, some who could ride the bull phase in the last financial year made a killing. The crypto rally in India was triggered by the March 2020 Supreme Court ruling that set aside Reserve Bank of India’s April 2018 directive banning banks and finance companies from dealing in “virtual currencies” or “providing services to facilitate” anyone “dealing with or settling” in such digital currencies.

The price of the closely-tracked Bitcoin crossed $60,000 a piece in April 2021 in the international market, but is now at a tad below $30,000. The Bitcoin run over the past decade has fascinated traders: from just $3.50 in 2011, the digital asset had surged to more than $19,700 in December 2017, plummeting to around $3,300 a year later, before rising again amid a raging pandemic.

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