On February 6, 2018, India's income tax authority revealed it has sent out 100,000 tax notices to investors it believes hold value in cryptocurrencies, in an effort to exert a level of control over the growing marketplace.
Sushil Chandra, head of India's Central Board of Direct Taxes, didn't mince words in a news release during an event held by the Associated Chambers of Commerce and Industry of India. He said, "People who have made investments (in cryptocurrency) and have not declared income while filing taxes and have not paid tax on the profit earned by investing, we are sending them notices as we feel that it is all taxable."
It's up for debate as to what type of guidelines will govern cryptocurrencies in India, as no official stance has been presented by authorities to the public. Cryptocurrencies are not considered legal tender, based on remarks made by Finance Minister Arun Jaitley as he announced the latest budget plan. In a budget speech given February 1, he said, "The government does not recognise cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payments system."
Although not considered a currency by India, cryptocurrencies are not tax-exempt in the country. According to Chandra, an issue arises regarding a lack of disclosure from investors:
"We found out that there is no clarity on investments made by many people, which means that they have not declared it properly."
Based on an estimate by Ajeet Khurana, who heads the Blockchain and Cryptocurrency Committee of India, approximately five million citizens are invested in cryptocurrency, many through local exchanges such as Zebpay, Coinsecure, Coinome, Unocoin, and Bitxoxo. According to Khurana, cryptocurrency exchanges operating in India have cooperated with the tax authority by helping the department identify users. "All the exchanges very happily and voluntarily provided that information," observed Khurana.
The Blockchain and Cryptocurrency Committee hopes that official guidelines will be released in the next coming months, said Khurana. Regarding the tax notices, he concluded, "It is a sign of the maturing of the ecosystem and not a cause of worry to anybody."