The Indian government’s tax department has asked people dealing in Bitcoin (Bitcoin) and other virtual currencies such as Ethereum (ETH/USD) and Ripple to pay tax on capital gains, Reuters reported.
India sent tax notices to tens of thousands of people dealing in cryptocurrency after a nationwide survey showed more than $3.5 billion worth of transactions had been conducted over a 17-month period, the income tax department said.
“We cannot turn a blind eye. It would have been disastrous to wait until the final verdict was out on its legality,” B.R. Balakrishnan, a director general of investigations at the income tax department in the southern state of Karnataka told Reuters.
Investors have also been asked to provide details about their total holdings and the source of funds in the tax notice.
“We found that investors were not reflecting it on their tax returns and in many cases, the investment was not accounted for,” Balakrishnan said.
Reuters quotes an Indian finance ministry official as saying that a federal committee was looking into the possibility of imposing restrictions on virtual currencies and that eventually parliament would have to legislate a regulatory regime. The biggest worry for New Delhi, the finance ministry official said, was how to protect investors trading on offshore exchanges.
Governments around the world are considering how to regulate cryptocurrency trading, and policymakers are expected to discuss the matter at a G20 summit in Argentina in March.