The Indian income tax department is now aggressively pursuing investors who profited from cryptocurrencies but Skipped Paying Taxes.
Up to 100,000 such investors have been issued notices, said Sushil Chandra, chairman of the Central Board of Direct Taxes (CBDT).
“We found out that there is no clarity on investments made by many people, which means they have not declared it properly…we have informed all the DGs (director-generals of income tax) across India. They are issuing notices and so that would be taxed,” Chandra said at an event in New Delhi on Feb. 06.
The I-T department will also try to assess the source of the money invested in these digital currencies. If their origin can’t be accounted for, they will come under tax-scrutiny. “So we will tax that particular amount (invested in cryptocurrencies) and they should pay tax on that,” added Chandra.
In December 2017, tax officials had surveyed Virtual Currency Exchanges to collect transaction and investor data. And reports say that the number of people served notices may rise up to 500,000. For now, authorities are zeroing in on those who made significant profits, a lawyer who works with a few Indian bitcoin exchanges had told Quartz earlier.
The price of a bitcoin had zoomed significantly last year to around Rs14 lakh a piece two months ago. As prices soared, many are believed to have booked profits, but skipped paying taxes, industry insiders said. These profits will fall under capital gains and will attract tax rates similar to those on share and mutual fund sales, tax officials said.
There are 10 cryptocurrency exchanges with five million users and monthly volumes of Rs10,000 crore ($1.5 billion) in India, according to industry estimates from early January.
This tax assessment comes days after the government of India clarified that it is likely to put in place rules for the Virtual Currency ecosystem before the end of the next financial year. A committee comprising officials of the finance ministry, the central bank, and market regulator Securities and Exchanges Board of India (SEBI) is currently looking into it.
An earlier panel, set up in April 2017, had recommended against encouraging trading on these exchanges. However, industry players argue that virtual currency exchanges can ensure proper trail for transactions is available, discouraging the informal economy. “We ensure that we follow the right practices with regards to the know-your-customer and anti-money-laundering norms. All the transactions are done via bank accounts to keep track,” said Nischint Sanghavi, head of exchange at Zebpay, a virtual currency trading platform.
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