Cryptoexchanges under the purview of IT department for inspecting financials

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Amid the ongoing uncertainty around cryptocurrencies and crypto exchanges, the Income Tax department’s recent move is set to add to the bourses’ woes. The Income Tax department has asked three crypto bourses to furnish all trade details and ledger entries in order to check the number of coins sold, price of each coin, and the time of sale by traders.

Just another regular inspection

However, these inspections were considered routine by tax officials to collect information, ascertain the activities happening at the bourses

“This is just a routine inquiry, IT department wants to understand what exactly is happening at exchanges. Looking at the larger picture the government is also looking to regulate cryptocurrencies which is a good thing,” said a person familiar with the matter, who didn’t wish to be named.

Such inspections by the tax department would only make the cryptocurrency space transparent and would let government bodies regulate the industry more efficiently, the person said.

“So, this is only a routine inquiry by the Income-Tax department and is not particularly alarming” he added.

In all transactions pertaining to stock market trades, the Income Tax department can compare the financial transaction details submitted by the brokers with respective returns filed by investors. However, Cryptocurrency transactions require no broker or intermediary, with traders placing buy or sell orders directly on the exchange platform.

Tax on the sale of cryptocurrency is taxed at the full tax rate of 30% as digital assets are not defined as ‘securities’ under the Securities Contracts (Regulation) Act.