Crypto investments under scanner: CBDT launches probe into unaccounted revenue; high-risk investors in VDA may face scrutiny

The Central Board of Direct Taxes (CBDT) has launched a probe into attainable tax evasion and laundering of unaccounted revenue via investments in digital digital belongings (VDAs), together with high-risk VDA transactions and cryptocurrencies, sources in the federal government stated on Thursday.The tax authority is presently verifying people and entities engaged in high-risk VDA transactions who seem to have didn’t adjust to key provisions of the Income Tax Act, 1961, PTI reported. These embrace non-disclosure of digital asset revenue and incorrect tax filings, in line with officers acquainted with the matter.Under Section 115BBH of the Income Tax Act, launched in the Finance Act, 2022, revenue from the switch of VDAs is taxed at a flat price of 30%, plus relevant surcharge and cess. The regulation prohibits deduction of any bills aside from the price of acquisition and likewise disallows the set-off or carry-forward of losses from VDA transactions.Government information analytics has revealed widespread non-compliance, with a big variety of taxpayers both failing to report digital asset features in the designated Schedule VDA of their revenue tax returns (ITR), or paying tax at decrease charges whereas incorrectly claiming advantages similar to price indexation.CBDT has matched ITR filings with TDS information submitted by Virtual Asset Service Providers (VASPs), generally referred to as crypto exchanges, and discrepancies have triggered a wider scrutiny, officers stated. Taxpayers discovered defaulting might be topic to additional verification or scrutiny under the regulation.In latest weeks, the board has despatched emails to 1000’s of people recognized as high-risk defaulters, urging them to overview and, if vital, replace their ITRs to precisely replicate revenue from VDA transactions.The growth comes under the CBDT’s ongoing push to advertise voluntary compliance via its “NUDGE” framework — quick for Non-intrusive Usage of Data to Guide and Enable taxpayers — under its “Trust Taxpayers First” philosophy.This is the third NUDGE marketing campaign initiated by the division in the previous six months, following earlier efforts targeted on overseas asset disclosures and withdrawal of ineligible deductions claimed under part 80GGC.