Income Tax Notice for Crypto Trading under Section 148

Understanding Section 148: Inquiry: Allows tax authorities to inquire before issuing formal notices. Opportunity to Respond: Taxpayers can present their case before a notice is issued. Contents of the Notice: Show Cause: Taxpayers must demonstrate why a notice should not be issued. Time-Bound Response: Responses must be submitted within the specified timeframe. Issuance Criteria: Escaped Assessment: Issued if taxable income is believed to have escaped assessment. Prior Approval: Requires approval before issuance.

Responding to the Notice: Understanding Allegations: Review notice contents carefully. Gathering Evidence: Collect relevant documents. Preparing Response: Craft a comprehensive response. Timely Submission: Respond within the stipulated timeframe. Tax Notice for Crypto Trading under Section 148A(b): Information Included: Details of crypto transactions for specific financial years. Actions Required: Visit ITD office, provide bank statements, submit computation of gains/losses, disclose investment and wallet details, and submit a comprehensive response.

How ITD Knows About Crypto Trading: PAN Requirement: Exchanges collect PAN data. Data Analysis: ITD analyzes PAN data to identify traders. Insight Portal: Additional data uploaded via VRU/CRIU functionality. Issuance of Notices: Notices issued based on collected data. Penalty on Tax Notice for Crypto Trading: Compliance Challenges: Many traders overlooked reporting crypto income. Penalties by AO: Penalties for underreported income or non-filing of ITR. Additional Penalties: Further penalties for non-compliance.

Reply to Tax Notice under Section 148: Understand Notice: Read and comprehend details. Justify Transactions: Provide explanations and supporting documents. Classify Income: Determine income type (Capital Gains or Business Income). Review Previous Filings: Assess previous tax filings. File Outstanding ITRs: Commit to filing outstanding ITRs promptly. Submission Method: Choose a suitable method for responding.