The Income Tax department of India sent notices to cryptocurrency traders this January following surveys conducted at nine Indian crypto exchanges across cities last December.
The Income Tax department sent out notices to crypto investors this January.
The surveys carried out by Income Tax department officials and Blockchain experts contracted by the department collected data on investor identity and quantum of investments. After collecting the data, notices were sent to cryptocurrency traders and investors asking them to pay taxes on capital gains from crypto assets. Investors were also asked to divulge information on crypto holdings and source of funds.
BR Balakrishnan, director general of investigations at the Income Tax department in Karnataka, revealed that many crypto investors don’t mention crypto investments in their tax filings and also don’t pay taxes on capital gains from such investments. Also, many investors couldn’t account for the source of funds too, the official added.
The Income Tax department’s crackdown on unscrupulous crypto investors comes in the wake of huge investments in cryptocurrencies. It has emerged that 2 lakh new users invest in cryptocurrencies every month and over $3.5 billion worth of trades in cryptocurrencies have happened in just 17 months! The crackdown appears to be an attempt to clamp down on money laundering.
Though the Income Tax department has made it clear that returns on crypto investments will be taxed, the rate at which capital gains from cryptocurrency investments will be taxed is not yet clear. The lack of regulations and laws don’t help either. While the Reserve Bank of India has been warning against legal and financial risks of investing in cryptocurrencies, the government of India has now constituted a federal committee to study and provide recommendations on cryptocurrencies.
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