The Income tax department is now thinking to investigate the cryptocurrency exchanges over the tax applicability to their total income. The direct tax department could look into the quantum of corporate tax payable for the cryptocurrency exchanges, said people aware of the development.
This comes after the Goods and Services Tax (GST) department conducted searches in the past week on the crypto exchanges and asked them to pay GST on their transaction fees or margins.
Further, there is the matter of the tokens issued by the exchanges and how to capture the increase in their value. In this regard, the indirect tax department has already collected the data during the recent searches over non-payment of GST, and the data is now being shared with the direct tax department for further investigations to ensure better tax compliance.
However, “There is no clarity in the way the exchanges recognise revenues. Each firm does it as per their understanding of accounting and the income tax officials have concerns over the ambiguity,” a person aware of the development said.
In this regard, earlier, crypto exchanges have sought clarity on crypto assets from government. “In some cases, the revenue recognised is several times more than the margins for exchanges. Margins are the real revenue for the exchanges, but that will need to be established with the tax department,” a senior tax lawyer told ET.
Knowledge Source
MCA Provides Relaxation on Additional Fees on Filing of Annual Returns/Financial Statements