A nationwide survey by India’s tax department has reportedly seen ‘tens of thousands’ of notices being sent to cryptocurrency traders.
Over a 17-month period, more than $3.5 billion worth of transactions in digital currencies such as bitcoin and ethereum were conducted by the country’s citizens, according to a report from Reuters. The data was collected from nine exchanges in India.
The tax notices come at a time when global regulators are focusing more attention on the digital currency sector in an attempt to protect users from fraud. Just last month, bitcoin was within touching distance of reaching $20,000 for the first time amid heightened investor interest. However, since then, the cryptocurrency has fallen in value, dropping below $10,000 last week after a major sell off and market correction. Bitcoin has recovered slightly in value and is currently trading at over $11,500, according to CoinMarketCap.
As a result of the market volatility, a report from last week suggests that there is much speculation as to whether the South Korean government will ban digital currencies in the country. Not only that, but more recently it was reported that that government is hitting South Korean cryptocurrency exchanges with huge tax demands in a bid to tackle the sector, reports Fortune.
However, even though India has repeatedly issued warnings to users – as early as 2013 – on the risks they face when trading with digital currencies, with many calling them a Ponzi scheme, they haven’t placed any hurdles in the way. Now, though, it appears that India’s tax department wants investors to pay tax on their capital gains.
Speaking to Reuters, B.R. Balakrishnan, a director general of investigations at the income tax department in the southern state of Karnataka, explained that the tax notices were sent to determine the patterns of digital currency trading.
“We cannot turn a blind eye. It would have been disastrous to wait until the final verdict was out on its legality,” he said.
Additionally, the department has asked for the details on how much investors hold in digital currencies and the source of their funds.
“We found that investors were not reflecting it on their tax returns and in many cases, the investment was not accounted for,” Balakrishnan added.
It remains to be seen what impact this will have on investors and their trading patterns. According to the report, the biggest worry was determining how to protect customers trading on offshore exchanges.
Aman Kalra, marketing head of Coinsecure, a bitcoin exchange in New Delhi, which has 100,000 registered users, said:
“Considering cryptocurrencies are here to stay, the government must consider granting limited legality while ensuring that these are not used for crypto crimes.”