India’s income tax department has issued tax notices to tens of thousands of cryptocurrency investors following a nationwide survey, it has been reported.
According to a report from Reuters, a survey found that the nation’s citizens had conducted over $3.5 billion worth of trades and transactions over a 17-month period. These included the likes of bitcoin and ethereum after data was gathered from nine exchanges in Mumbai, Delhi, Bengaluru, and Pune.
The Indian government has repeatedly issued warnings over the use of digital currencies such as bitcoin. Back in 2013, India’s central bank, that Reserve Bank of India (RBI), issued its first warning about the potential misuse of cryptocurrencies, which was later reiterated last February.
However, even though it has stated that users will be trading in the market at their own risk, they haven’t imposed any obstacles on the industry. That is, it seems, until now. As a result, India is now looking to tax capital gains.
According to B.R. Balakrishnan, a director general of investigations at the income tax department in the southern state of Karnataka, the tax notices were sent to determine the pattern of trading, adding:
We cannot turn a blind eye. It would have been disastrous to wait until the final verdict was out on its legality.
Balakrishnan said that details about investors total holdings and their source of funds were asked for. This is because people were not reflecting it on their tax returns with the investment not accounted for in many cases.
Attention on the cryptocurrency market has increased, primarily due to bitcoin, which saw its value within touching distance of $20,000 for the first time over the Christmas and New Year period. As a result, global regulators are focusing more on the market.
This can be seen by the fact that Japan and China have made some noise about a crackdown, while South Korean officials have hinted at shutting down domestic cryptocurrency exchanges. As a result of these market factors, the price of bitcoin dropped to its lowest level this year to below $10,000.
However, according to Aman Kalra, marketing head of Coinsecure, a bitcoin exchange in New Delhi, which has around 100,000 registered users, the Indian government shouldn’t label the market as a Ponzi scheme as they aren’t doing anything illegal, adding:
Considering cryptocurrencies are here to stay, the government must consider granting limited legality while ensuring that these are not used for crypto crimes.