After conducting a national survey of cryptocurrency exchanges Department of income tax of India has sent tax notices to a number of cryptocurrency traders.
According to Reuters, the tax inspectors of India found that citizens invested and entered into transactions in cryptocurrency, such as bitcoin, Ethereum and Ripple, valued at over 3.5 billion USD over the past 17 months.
As reported in mid-December, the Indian tax authorities have visited many exchanges of cryptocurrencies in order to explore the transactions and to collect “data on investors and traders, transactions and counterparties, as well as information about the used Bank accounts, among other things”. The authorities stated that the study was aimed at money laundering and tax evasion. During the first day of the investigation Department of income tax has confirmed the intention to introduce taxation of cryptocurrency investors.
After obtaining the necessary data to the tax authority of India has sent notifications “tens of thousands” of citizens who were engaged in investing in cryptocurrencies. They say that the government encourages the cryptocurrency traders to fill the Declaration of taxes on capital gains, and collects information on “total income and sources of origin of funds” of the citizens.
“We found that many investors did not reflect the cryptocurrency income tax returns, and their cryptocurrency investments were not taken into account”, – said the Director of the Department of income tax B. R. Balakrishnan.
The official position of India in the cryptocurrency remains unclear, despite increasing adoption of crypto-currencies as means of payment and awareness of cryptocurrency among ordinary citizens lately. Meanwhile, self-regulated cryptocurrency exchange, which operates according to the rules of KYC (know your customer), adding over 200,000 new users every month. All of them ignored repeated warnings from the Central Bank of India, which acts against investment in decentralized peer-to-peer currency. Attempts were made to clarify the situation with the cryptocurrency market. Consideration of one of the two applications was held in the Supreme court of India. This prompted the government to bring some clarity and offer to create a regulatory framework.
Advocate, Supreme Court cyber crimes Pavan Duggal has offered to provide the cryptocurrency market “limited legality”. He claims that it “will retain the cryptocurrency market” and at the same time will prevent the use of cryptocurrency for criminal purposes.
The inter-Ministerial Committee of the government of India is developing a regulatory framework for the legalization and regulation of cryptocurrency in the country. Pending further instructions the government of India the income tax Department insists on the necessity of taxation of the cryptocurrency market.
“We cannot turn a blind eye to it. It would be disastrous to wait for the final verdict on the legality of cryptocurrency,” said Balakrishnan.