As the number of cryptocurrency users is increasing, it is becoming complicated to track each bitcoin user worldwide, and many users benefit from this. In the initial stage of this digital cryptocurrency, people started doing illicit activities when there were no centralized bitcoin wallets (bitcoin exchanges). It was very tough for the government to track since bitcoin was newly introduced in the market. People send bitcoin from one wallet to another, and no one can track the wallet owner. It became complex for the government to track but it can track the bitxt.
But in today’s era, people have to create an account on the centralized exchange for buying, sending, receiving, or selling bitcoins. Moreover, all the transactions get recorded on the platform because every Bitcoin user will show their identity when signing up for the bitcoin exchange.
Over thousands of bitcoin exchanges and millions of bitcoin traders and investors use centralized bitcoin wallets and decentralized wallets. These exchanges are recording their miner to miner transactions for tax purposes. Since they are doing transactions with the centralized software wallets, they have to connect their bank details with the wallet. When they trade bitcoin and profit through it, they have to withdraw it from their bank. So there are two tracking systems tracking the bitcoin transactions. The first is the bitcoin exchange, and the second is the banking system.
Many people are not aware
There are a lot of bitcoin users who are under the illusion that bitcoin is a decentralized system so that no one can track their crypto trades. Therefore, they do not have to pay taxes while using the centralized system for spending. So they are just doing a lot of transactions without caring that banks and bitcoin exchanges are tracking their tiny to tiny transactions for tax purposes. So there are many people tracked by the tax official who spends a high amount in crypto transactions without paying a single amount as tax.
The tax official created a list of high investors
By gathering the data from different sources like crypto exchanges and banks, the tax officers have created a list of 700 bitcoin. And other crypto users who spend millions in digital currency but do not pay tax to the government. It means that the users in the list are high transactional investors, not ordinary investors. Moreover, the users included in the list of tax officials are not only individuals or houses wives but also small and medium businesses, companies, or startups.
Capital gain exceeded
There are also many people whose capital gain exceeds the limit of 40,00,000 rupees. You know about the capital gain (profit from the long and short-term asset holding). Still, they did not show or pay any tax on it. Suppose you gain any income from this asset. Your gain will be considered capital gain, making you liable to pay tax according to the Indian regulation. And any digital currency is also known as an asset in India. Different countries may have different charges.
A penalty with new crypto tax rules
Recently, new crypto rules were proposed and passed in the parliament. The main motive of these rules is to restrict the bitcoin and crypto users to trade and control tax evasion. So you must know the rules given below:-
- Bitcoin and other crypto users must pay one percent TDS (tax deducted at source) and whether you are making money or getting lost.
- Bitcoin and other crypto users must pay thirty percent of the profit without setting off the loss from the portfolio.
- You will also have to pay the bitcoin transaction fees, as you already know, and the bitcoin exchange fees by deducting GST.
These are the new rules for the cryptocurrency in India law recently announced. Still, if you are on the list of 700 people, you also have to pay the penalty for tax evasion up to fifty percent overtax. So the tax officers announced that we would take a hard step and issue a note to these shortlist tax evasions, which are doing significant transactions but not paying the tax.