Tens of thousands of cryptocurrency investors in India are now waiting for tax demands to land on their doorstep courtesy of an Indidan Government Tax Department announcement on Friday.
As reported by Reuters, a survey of 9 national exchanges highlighted that over $3.5 billion worth of transactions had been conducted over a 17-month period but few investors had included any of this information on their tax returns.
As a result, not only is the tax authority demanding people pay any liable capital gains tax on profits made but they are also asking for details of investors’ total cryptocurrency holdings and the source of these funds.
No Formal Framework
Although the news comes less than a year after India’s shock demonetisation which specifically targeted tax evasion, the recent demands surprised many as there is as yet no formal tax policy in India that covers cryptocurrency or blockchain assets.
B.R. Balakrishnan, a director general of investigations at the income tax department in the southern state of Karnataka, is quoted by reuters as stating, “We cannot turn a blind eye. It would have been disastrous to wait until the final verdict was out on its legality.”
Recent estimates suggest the country is adding almost 200,000 cryptocurrency users every month, causing an estimated trade volume of about 20 billion Indian rupees ($315 million).
Tax officials themselves are known to have participated in purchases in an attempt to locate any irregularities, especially on unregulated exchanges.
India’s Prime minister Narendra Modi will address the opening session of the World Economic Forum in Davos on January 23. Although it is not known if he will include tax reforms in his speech, it is understood that the legality and policing of cryptocurrencies are among the subjects up for discussion during his scheduled bilateral meeting Swiss President Alain Berset.