The IT department can make PAN (permanent account number) compulsory for crypto investors. This would be in line with the Demat account guidelines for equity transactions.
What will be the after effects of such a regulation?
Lately, disclosure of cryptocurrency holdings and associated benefits is voluntary. If tax authorities proceed with the PAN mandate, cryptocurrency exchanges will have to produce a statement of financial transactions (SFT) before the income-tax department.
How will it affect crypto exchanges?
According to a government official, the department wants the income from crypto trading to reflect in taxpayers’ annual info statement (AIS) for tax-filing purposes. Thus, the tax department may ask crypto exchanges to report all transactions done by their users.
How would it help in monitoring transactions?
The official was of the perspective that making PAN compulsory would aid crypto investors to meet the KYC (Know Your Customers) requirements and thus enable better analysis of such transactions and detection of any attempts of laundering of funds and tax evasion.
How does it relate to ITR filing?
ITR filing for the assessment year 2022-23 didn’t reflect cryptocurrency transaction details. As per sources, such information would be reflected while filing ITR from the upcoming assessment year.