Ever since I began writing and sharing about the environment surrounding cryptocurrencies in India; people ask me on daily basis about Income Taxes surrounding cryptos and possibility of running into an issue with the I-T department in India.
The fact is that there's not a lot that I-T department can do other than behaving like thugs and coming after your hard earned crypto savings in an aggressive manner. Their notice to HNIs investing in cryptos from India had a number of points that can be considered an invasion of privacy and the right to earn a legitimate income-atleast in my opinion. There maybe bad actors for sure trying to scam people of their money, but then that's just a tiny % of the users in this domain.
Over the past couple of weeks I've discovered from my sources that those who have received these notices have drafted their responses to the I-T department. However, a few have drafted responses similar to that reported by ET.
People are claiming not to have owned any crypto, or that their wallets were hacked, or the crypto they en-cashed was a consulting income they received overseas or income received for freelancing. These are some of the responses I've heard. I'm not against paying income tax and infact I have been doing this for years and in the last few I've declared my gains from any crypto sale.
However, the fact that the government chooses to go aggressively after crypto investors while ensuring no regulations are in place to protect interests of investors from India has many fuming, myself included. The obvious knee-jerk reaction is that people will evade paying taxes to prevent the government from ripping them off by forcing heavy taxes on investments without a proper policy in place.
If the government drafts a proper framework legalising cryptocurrencies in India, many of these issues are likely to fade away with time and I'm sure many users may be willing to come forth and pay the taxes due. The tax department sent notices to 500,000 HNI's demanding answers to over 20 tough questions. It is nothing short of harassment by the government agency tasked with the job of ensuring people pay their taxes.
India is a land full of direct and in-direct taxes and in such a scenario where we pay taxes through our nose. People are unlikely to bend over backwards and oblige just because a government rooted in corruption demands us to reveal all the information about our wealth.
The banks are also hand-in-glove with the government when it comes to charging exorbitant fees to their customers.
On the bright side, there is no ban on crypto sale/purchase nor do the exchanges here have any restrictions other than mandatory KYC of all their clients.
I close this post by sharing something a friend shared on my FB wall:
In India:
Putting money in Bank: KYC Required.
Putting money in MFs: KYC Required.
Putting money in Online Wallets: KYC Required.
Putting money in Political Parties:
KYC NOT Required.
(Know your Clever) Politicians.
This is the current state of affairs in India and more the reason why we need a crypto revolution. In the meantime, dont panic and know your rights. File your returns and have a good auditor assist you in the same. Read my report in TheQuint on how to file your taxes to account for any crypto-gains. Good luck!
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