India has sent tax notices to tens of thousands of people dealing in cryptocurrency after a nationwide survey showed more than $3.5 billion worth of transactions have been conducted over a 17-month period, the income tax department said.
Governments around the world are grappling with how to regulate cryptocurrency trading, and policymakers are expected to discuss the matter at a G20 summit in Argentina in March.
B.R. Balakrishnan, a director general of investigations at the income tax department in the southern state of Karnataka, said notices were sent following the survey to assess the penetration and patterns of virtual currency trade.
“We cannot turn a blind eye. It would have been disastrous to wait until the final verdict was out on its legality,” he told Reuters.
The tax department has asked people dealing in bitcoin and other virtual currencies such ripple and ethereum to pay tax on capital gains. They have also asked for details about their total holdings and the source of funds in the tax notice seen by Reuters.
“We found that investors were not reflecting it on their tax returns and in many cases, the investment was not accounted for,” Balakrishnan said.
An Indian finance ministry official said a committee was looking into the possibility of imposing restrictions on virtual currencies and that eventually parliament would have to legislate a regulatory regime.
Tax inspectors said they sought help from experts in blockchain, the technology that underpins bitcoin, to conduct the survey.
In some cases, tax officials themselves participated in the trade to identify loopholes after they found investors had poured in billions of dollars through unregulated exchanges.
The biggest worry for New Delhi, the finance ministry official said, was how to protect investors trading on offshore exchanges.
Already hundreds of investors have gone to the police and courts with complaints of transactions in virtual currencies that turned out to be fraudulent, said Pavan Duggal, a Supreme Court lawyer specialising in cybercrimes.
“Considering cryptocurrencies are here to stay, the government must consider granting limited legality while ensuring that these are not used for crypto crimes,” he said.
Source: zeebiz.com
