Indian Crypto-Investors Hit with Tax Bill
Although the legal status of cryptocurrencies in India is still to be determined, Indian tax authorities have got ahead of legislation by sending tax notices to thousands of cryptocurrency traders.
It has been estimated that in the last year and a half more than $3.5 billion of transactions have taken place in India. According to India’s main crypto exchange, Zebpay, 200,000 new traders are entering the market each month.
Though Indian authorities have warned cryptocurrency investors of potential dangers they have not so far issued any regulation or ban on crypto activity. Rather than wait for government clarification the tax department decided to move now.
“We cannot turn a blind eye”, said director general of investigations in Karnataka, B.R. Balakrishnan, “it would have been disastrous to wait until the final verdict was out on its legality”.
Last month tax officials visited exchanges throughout the country in “survey operations” to gather, “evidence for establishing the identity of investors and traders, transaction undertaken by them, identity of counter-parties, related bank accounts used, among others.”
Surabhi Ahluwalia of the tax department said the the inspections took place to collect, “information about (the) modus operandi of bitcoin exchanges, investors, their source of investment and possibility of collecting tax”.
Investors not Paying any Tax
What they found was that Investors, “were not reflecting it [increases in the value of their investments] on their tax returns and in many cases, the investment was not accounted for”.
Now tax officials have sent out notices to tens of thousands of exchange account holders advising them to pay capital gains tax on any increase in the value of their cryptocurrency holdings.
The Indian government has issued statements that dismiss cryptocurrencies as little more than a Ponzi scheme. However, with the increased popularity of virtual currencies in the country, they are being forced to come to some kind of accommodation with crypto. The Indian Finance Ministry has announced that a federal committee is investigating what the government approach to regulation or restrictions should be.
Reuters quoted Supreme Court lawyer Pavan Duggal as saying, “the government must consider granting limited legality [to cryptocurrencies] while ensuring that these are not used for crypto crimes.”