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, according to two people privy to the discussion.
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.