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Bitcoin ‘used for tax evasion’ by four lakh HNIs

MY BIZ: Bitcoin ‘used for tax evasion’ by four wealthy Lakh residents

The Income Tax (IT) department plans to issue notices of suspected tax evasion to more than 4 lakh high networth individuals (HNI) across the country who allegedly trade and invest in Bitcoin cryptocurrency.

IT officials had last week conducted surveys on nine virtual currency exchanges to investigate cases of suspected tax evasion.

Senior IT officials confirmed that of the estimated 20 lakh entities registered on these exchanges, more than 4 lakh were operational and were conducting virtual currency transactions and investments.

Since Bitcoin or virtual currency (VCs) are currently illegal and unregulated in the country

Since Bitcoin or virtual currency (VCs) are currently illegal and unregulated in the country

The survey was conducted to gather evidence to establish the identities of investors and traders, trace the transactions they undertake and identify counterparties and bank accounts used by them.

The research department of the IT department in Bengaluru, which oversaw operations, has now sent the information from individuals and entities that found these databases to eight other such wings across the country for detailed investigation.

The individuals and entities whose records have been recovered by the department are now being investigated for tax evasion.

Announcements are being made and they will have to pay capital gains tax on the investments and trading in Bitcoin, a senior official said. The notifications to HNIs and their business entities will first request their relevant financial information and then determine whether there is reason to resolve a tax question.

Since Bitcoin or virtual currency (VCs) are now illegal and unregulated in the country, the IT department has taken action under existing provisions of the Income Tax Act, officials said.

A survey action under IT law involves tax officials making a surprise visit to the business premises of the party in action, but not to their residential ones.

The action was launched in view of the sudden rise in the value of Bitcoin, which is expected to have resulted in huge capital gains for individuals and business entities registered for this purpose.

Presumably black money converted to white, post-demonetization, through the use of Bitcoin was also under the department’s scanner, officials said. Earlier this month, a Bitcoin’s value had risen from $ 10,000 to a phenomenal $ 20,000 at the beginning of the year.

Bitcoin, a virtual currency, is not regulated in the country and its circulation has long been a concern with central bankers around the world.

The Reserve Bank of India (RBI) has also warned users, holders and traders of virtual currencies. The government has also said that it does not recognize ‘crypto currency’ as a legal tender in India.

Finance Minister Pon Radhakrishnan informed Lok Sabha on Monday that the government is not keeping records of virtual currencies such as Bitcoin.

In a written answer, Radhakrishnan also said that a committee, assembled by the Ministry of Economic Affairs, is taking stock of the current status of virtual currencies in India and has submitted its report worldwide.

The committee has been asked to examine existing global regulatory and legal structures for virtual currencies and to propose a framework for regulating these currencies, the minister said.

The minister answered a question about whether crypto currencies such as Bitcoin have been used more and more in recent years and whether the government has received complaints about abuse of virtual currencies.

The minister further said that the Reserve Bank also warns users, holders and traders of virtual currencies from time to time about the potential financial, operational, legal and security-related risks.