India: taxmen may investigate soon who made fortune in Bitcoins

The India's Income Tax (I-T) department is trying to find a way to tax bitcoin transactions, news agency Reuters reported on Wednesday quoting officials. The I-T department's intent may be seen in the light of the surveys it conducted at nine bitcoin exchanges across the country.

A spokesperson for the country’s Income Tax Department said that the agency has launched surveys in a number of major cities to learn more about how citizens are trading Bitcoin on exchanges, as well as how investors are betting on the currency, and how it might collect taxes from them. "We are looking at collecting information about modus operandi of bitcoin exchanges, investors, their source of investment and possibility of collecting tax," Ahluwalia told Reuters.

On Wednesday, sleuths of the I-T department under the command of the Bengaluru investigation wing, visited the premises of exchanges in various cities including Delhi, Bengaluru, Hyderabad, Kochi and Gurugram.
The survey, under section 133A of the Income Tax Act, was being conducted for "gathering evidence for establishing the identity of investors and traders, transaction undertaken by them, identity of counterparties, related bank accounts used, among others," the officials said.

The news comes after reports of the government having set up a cryptocurrency panel, which recommended shutting down dealers of these unregulated and decentralized currencies across the country. However, nothing seems to have come of it so far.

With that, the climate in India seems like it might rain on cryptocurrency enthusiasts’ parade. One of the big draws towards investing in Bitcoin and the lot is that they’re not governed by countries or agencies around the world.

The Reserve Bank of India isn’t altogether keen on citizens dabbling in these currencies, as they aren’t regulated. Their volatility is also a source of concern: since the beginning of November, Bitcoin’s value has jumped from $7,000 to over $16,460 today.

It’ll be interesting to see how India navigates this: as one of the largest developing and fast-growing economies in the world, other countries will likely look to it to learn how they should regulate, and maybe even tax cryptocurrency transactions within their borders.

Earlier in March, the Union finance ministry had constituted an Inter-Disciplinary Committee to take stock of the present status of virtual currency both in India and globally and suggest measures for dealing with such currencies.