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Income Tax Department to exact taxes from few lakh Bitcoin investors

Income Tax Department to exact taxes from few lakh Bitcoin investors

The I-T Department had conducted survey operations at bitcoin exchanges across India in December last year to ascertain the identity of traders and investors, transactions between them, bank accounts used for this, among others.

While the government is planning to take out cryptocurrencies, taxmen are planning to levy taxes on the benefits collected from them. A few lakh tax notices have been sent to individuals who have invested in bitcoins. The Income Tax Department is working to obtain due taxes on these investments, said CBDT Chairman Sushil Chandra.

The head of Central Board of Direct Taxes (CBDT) told PTI that the Department came to know of cases where Bitcoin investors did not pay advance tax on gains from their investment, or did not mention these investments in their previous tax returns. These cases number in a few lakhs, the CBDT boss said.

"We have issued notices (to investors) and they (many of them) have agreed to pay taxes. We will definitely take taxes as far as the money is concerned which is invested (in bitcoins trade) and is unexplained," Chandra said.

The I-T Department had conducted survey operations at bitcoin exchanges across India in December last year under provisions of Income Tax Act. These surveys were to ascertain the identity of traders and investors involved, transactions made between them, the bank accounts used for this, among others.

The decision to exact taxes on Bicoin investments comes at the heels of the Budget speech by Finance Minister Arun Jaitley where he said bitcoins and all other cryptocurrencies are illegal. The Minister said that the all measures will be taken to eliminate use of cryptocurrencies used in illegal as well as payment practices.

"The government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system," he said.

Jaitley, however, did agree to explore the blockchain technology to give a leg-up to digital economy, an ambitious project of the Modi government. Distributed ledger system or blockchain technology allows organisation of any chain of records or transactions without the need of intermediaries, he said in his Budget speech.

The government in December cautioned investors to be wary of virtual currencies like bitcoin, saying they are like Ponzi schemes with no legal tender and protection.

Meanwhile, experts advised government to regulate cryptocurrencies instead of banning them. "While there could be several risks associated with crypto currencies, the fundamentals of the underlying blockchain technology or distributed ledger system is strong. Blockchain technology will find many good use-cases not only in private businesses but also in governance," Anshuman Verma, CEO of M1L and The Invention Factory was quoted by PTI.