The income-tax department could make a permanent account number (PAN) mandatory for cryptocurrency investors. This would be in line with the demat account rules for equity transactions, reported Business Standard.
At present, disclosure of crypto holdings and related gains is voluntary. If tax authorities go ahead with the PAN mandate, crypto exchanges will have to furnish a statement of financial transactions (SFT) before the income-tax department.
“The department wants the income from cryptocurrency trading to reflect in taxpayers’ annual information statement (AIS) for tax-filing purposes,” said a government official.
Therefore, the tax department may ask crypto exchanges to report all transactions done by their users, the official was quoted in the report as saying.
The official was of the view that making PAN mandatory would help cryptocurrency investors meet the Know Your Customers (KYC) requirements and hence allow better monitoring of such transactions and detection of any attempt of tax evasion or laundering of funds.
ITR filing for the assessment year 2022-23 did not reflect crypto transaction details. According to the sources, such information would be reflected while filing ITR from the next assessment year.
Under the new regime effective from July 1, transactions will have to be disclosed in the income-tax return and a paper trail will have to be maintained.
If the PAN of the deductee (seller) is not available, then the tax at the time of transfer of virtual assets will be deducted at the rate of 20 per cent. Further, if an individual has not filed his/her income tax return, TDS will be deducted at a higher rate of 5 per cent (as against the normal rate of 1 per cent), if the payer is not a specified person.