Having shifted the coins offshore using the Blockchain network to avoid stifling regulations, they have sensed that sharing the information with Income tax (I-T) authorities could invite as much trouble as hiding it.
Declaring their crypto holdings – originally bought on Indian exchanges and now parked in wallets with overseas bourses – in the ‘Foreign Assets (FA) schedule would be an indirect admission of having undertaken a transaction that could be in violation of the Foreign Exchange Management Act (FEMA). However, a non-disclosure of a ‘foreign asset’ could put them on the wrong side of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act – a harsh law that came into force in 2015 and can be used to impose criminal sanctions. (Under the FA schedule, an assessee has to provide details of foreign assets or income from any source outside India in a specific section of the ITR).
Techie Vs Taxman
Interestingly, however, given the nature of cryptos, which are different from regular assets like bank accounts, properties and securities, the dilemma of taxpayers could also put the tax office as well as practitioners in an unchartered territory.
“Reporting of crypto assets is fraught with issues – there are multiple aspects like identification of location, situs that are relevant. Two major theories on situs are: first, it is situated where the owner of crypto assets are situated in which case for resident taxpayers, cryptos may not be treated as foreign assets – and hence no reporting in Schedule FA is required; second, where the wallet that holds the crypto assets is situated (this could be offshore and hence may require reporting). Some nations have come out with guidance in…
