The Indian government is classifying cryptocurrencies under Section 158B of the Income Tax Act. With this move, the unreported crypto gains will be subjected to block assessment just like cash, jewelry, gold, or silver. Block assessment in the crypto world includes estimating the unreported income, calculating tax, interest, and penalties. This rule will only affect those who do not report their gains or income generated from the crypto industry.
Hefty Penalty for Unreported Gains
The most crucial update of this new rule includes introduction of 70% of penalty on unreported crypto earnings. If the trader fails to declare gains for up to four years after the tax assessment period, the government will be forced to impose a heavy fine.
New Classification and Regulation
These changes will be effective from February 1, 2025, and will be applicable to past transactions or retroactively. This will allow the authorities to scrutinize past unreported crypto gains as well. This is not the only change that has been brought up in the world of Indian crypto recently, the new law also classified cryptocurrencies as a Virtual Digital Asset (VDA).
Current Tax Scenario for Reported Gains
Currently, the incomes generated through crypto are taxed at a flat 30%, with 1% Tax Deducted at Source (TDS) on a transaction above ₹50,000 within a financial year. Even for the said policy, the Indian crypto community has been wanting the TDS rates to be brought down to 0.01% and the transaction limit to be increased above ₹5,00,000. According to the Indian crypto community, the current arrangement hampers growth and leads to people starting their business abroad.
With these strict regulations coming into the picture, traders and investors will have to be vigilant and report crypto gains and remain compliant to navigate the complexities of the new framework.
