As you read this, the price of Bitcoin is hovering above $7,000, less than half of its peak in mid-December. But it is still an impressive 625% up compared to a year ago. So those who had climbed aboard this gravy train early on-the cryptocurrency industry was estimated to be adding 2 lakh users in India every month before the bloodbath began-have made a fortune. And the taxman now wants a piece of the action.
According to Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra, the Income Tax Department has issued about one lakh notices to people who have invested in cryptocurrencies like Bitcoin without declaring these in their income tax returns.
"People who have made investments (in cryptocurrencies) and have not declared income while filing taxes, and have not paid tax on the profit earned by investing, we are sending them notices as we feel that it is all taxable," he said at an Assocham organised post-Budget seminar yesterday.
This move follows the extensive survey operations conducted by tax sleuths at cryprocurrency exchanges across the country last December under provisions of Income Tax Act. The agenda was to understand how many people are regular contributors, how many had registered themselves and how many were trading.
The survey revealed that over $3.5 billion worth of transactions had been conducted over a 17-month period, and tech-savvy young investors, real estate players and jewellers were among those invested in crpto street, putting in anywhere from Rs 3,000 to several lakhs of rupees. The numbers had to be rosy because cryptocurrency dealer Pluto Exchange had launched India's first mobile application for transacting in virtual currencies a couple of days before the New Year began.
"We found out that there is no clarity on investments made by many people which means that they have not declared it properly," said Chandra, adding "We have informed all the DGs (Director Generals of Income Tax) across India, they are issuing notices and so that would be taxed." For the record, as per income tax laws, money invested in virtual currencies is taxable if the source is unexplained. Moreover, the profit gained on such investments is taxable.
In any case, tougher regulatory norms for trading in virtual currencies are on the cards. Soon after Finance Minister Arun Jaitley declared cryptocurrencies illegal and added that the government "will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system" in his Budget speech, economics affairs secretary S.C. Garg reportedly said that a regulator will be appointed to oversee trading of crypto assets in unregulated exchanges. A panel looking into the matter is expected to submit its report in March.
With agency inputs
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