Pursuant to India’s Income Tax Department, it has started sending out Section 148A letters in connection with cryptocurrency activities in the financial year 2021-22 which is a major step in the country’s crypto policy development. It is a clear indication of the government’s intention to increase tax compliance and shed light on crypto assets.
What mainly causes a Section 148A letter?
The team pulls info from PANs, crypto platforms, banks, and ITRs to spot hidden moves, like skipping reporting or lying about earnings. Cases pop up in the insight Portal, flagged by risk tools that show fake high incomes based on sales totals rather than real profits.
Failing to report crypto in FY21-22, missing ITR for AY 2022-23, or using several wallets and exchanges can break the trail, data gets scattered across platforms. This makes tracking hard without a clear path. There’s no central record anymore. You’re left guessing what’s actually going on.
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Principal Issues and Considerations
One of the biggest problems is the tax authorities, which sometimes refer in their notices to “undisclosed income” that they have computed at very high levels, in particular based on the turnover volume and not on the net profits.
This very fact only exemplifies the need for proper reporting and keeping of records. Use of Advanced Information System (AIS) and KYC data-sharing between exchanges has made crypto transactions more traceable, thereby increasing the chances of receipt of notices for FY21-22 and FY22-23.
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The Future of Crypto Taxpayers
As the tax department increases the crypto focus, taxpayers must, above all, ensure that they remain compliant and report properly. Issuance of Section 148A notices is only the government’s way of highlighting how crypto regulation in India is still a changing story.
It is good to be ready when the notices come by by having proper and adequate backup documentation at hand and being able to justify one’s position.
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