Soaring bitcoin prices have now caught the attention of India’s taxman.
The income tax department has been surveying cryptocurrency exchanges across the country to zero in on those who profited from the recent boom but skipped paying taxes on the money they made. Tax officials may also use this opportunity to take a closer look at the overall wealth accumulated by certain individuals, alongside the gains made in virtual currencies.
“So apart from bitcoin or other currencies, all the mobile and immobile properties of an individual who has made significant gains in cryptocurrencies will be under scrutiny,” Sathvik Vishwanath, co-founder and CEO of Unocoin, a cryptocurrency exchange, told Quartz.
Another official of a virtual currency exchange, requesting anonymity, said income tax authorities have mentioned that they are also likely to assess if the gains from the cryptocurrency boom have been used to buy other assets. In some cases, all wealth accumulated in the last few years may be scrutinised.
Repeated attempts to contact officials at the income tax department were unsuccessful.
“The top people who have made maximum gains are the ones who are going to be under the scanner. That’s because the number of people showing gains on these virtual currencies is minuscule. And even now, there is no clarity on how the tax treatment of these gains should be,” a lawyer who works with a few Indian bitcoin exchanges told Quartz.
The spike
A single bitcoin, which on Nov. 01 was worth around Rs4.55lakh ($7,070), was valued at Rs13.80 lakh by Dec. 14. However, the price has corrected since then and stood at around Rs12.05 lakh on Dec. 28. This spike, and volatility, have fuelled concerns within the government and at India’s central bank. Earlier this month, an income tax team visited and investigated several bitcoin exchanges in Mumbai, Bengaluru, Pune, Hyderabad, and New Delhi. Based on these officials’ surveys, the department is reportedly set to serve notices to as many as 500,000 investors.
On Dec. 13, tax officials told Reuters that they are looking to collect information on the modus operandi of these exchanges, investors, and their source of investment. “The officials had requested data to try and analyse taxability of bitcoin,” Coinsecure, another virtual currency exchange, said in a blog post on Dec. 14.
In any case, this isn’t the first time cryptocurrencies have come under scrutiny in India. Besides the Reserve Bank of India keeping a close eye, the government has also constituted a committee to take stock of their current status and examine existing global regulatory and legal structures, P Radhakrishnan, India’s minister of state for finance, informed the Lok Sabha on Dec. 15. He said the panel has been asked to suggest a framework for their regulation.
Yet, in spite of these concerns, virtual currencies still haven’t been declared illegal in India.
