Cryptocurrency and Black Money Act
Many Cryptocurrency Traders & Investors have holdings in foreign exchanges such as Binance, FTX, etc. Plus many hold Cryptocurrency in wallets in foreign countries. All these individuals need to disclose all their foreign assets while filing their tax returns otherwise they would be in violation of laws. Not declaring undisclosed foreign income and assets could lead to hefty fines and a jail term under the Black money law.
Under The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, Indians would be required to pay 120% tax if they found to have not disclosed foreign assets. Besides, such persons would also face criminal prosecution with a jail term of up to 10 years.
The act provides for separate taxation of undisclosed foreign income and assets. Stringent penalties and prosecution, including rigorous imprisonment up to 10 years and penalty equal to three times of the tax have been prescribed for violation.
Aim of the act is to curb black money, and undisclosed foreign assets and income and imposes tax and penalty on such income.
Scope of total undisclosed foreign income and asset
As per Section 4. (1) The total undisclosed foreign income and asset of any previous year of an assessee shall be,—
| (a) | the income from a source located outside India, which has not been disclosed in the return of income furnished within the time specified in Explanation 2 to sub-section (1) or under sub-section (4) or sub-section (5) of section 139 of the Income-tax Act; | |
| (b) | the income, from a source located outside India, in respect of which a return is required to be furnished under section 139 of the Income-tax Act but no return of income has been furnished within the time specified in Explanation 2 to sub-section (1) or under sub-section (4) or sub-section (5) of section 139 of the said Act; and | |
| (c) | the value of an undisclosed asset located outside India. |
Valuation
The valuation of undisclosed assets will be done as per the rule defined under section 3 of Black Money Act.
Computation
Under normal income tax act, taxpayers are subject to deduction but while computing for such undisclosed foreign assets and income no such deductions will be applicable. While computing, if the assets/income are movable then value computed will be used to calculate the tax but if it is taxed prior then that value would be subtracted from the undisclosed income/asset. In case of immovable object, computation keeps in mind the value at the first day of financial year.
What the Black Money Law does NOT cover
All assets and incomes within India.
All Non-Residents and Not Ordinary Residents.
Incomes arising from Indian Sources.
Conclusion
In past, Government had handed over to the Supreme Court a list of 628 names that were on a list of HSBC account holders in Geneva handed over to India by France in 2011. India has also offered a “cash reward” to Herve Falciani, a former HSBC bank employee-turned-whistleblower, for securing fresh information on unaccounted money parked in foreign bank accounts.
Government of India is very serious in curbing the menace of Black Money and lot of efforts is underway to prosecute wilful violators. Cryptocurrency Traders & Investors need to disclose all their foreign assets while filing their tax returns otherwise they run the risk of being prosecuted under the Black Money Law.
DISCLAIMER
The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that we are not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. CA Mitesh and Associates is Mumbai's leading Cryptocurrency Taxation Firm which is committed to helping people navigate complex tax laws and banking regulations. Our main aim is to assist the individuals with applicable laws & regulations compliance and providing support at each & every level to make sure that they stay compliant and grow continuously. For any query, help or feedback you may get in touch here - Appointment with CA. Please note the all consultations with the CA are Paid consultations.
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