Governments all over the world are seemingly cracking down on cryptocurrency activity. In India, things are slowly evolving in such a direction. Not only are banks closing bank accounts related to cryptocurrency activity, but the tax authority is getting involved as well. More specifically, a fair few speculators do not declare their investments on tax returns It is not an illegal activity by any means, but it does raise some questions which need to be answered. All affected investors have received an official tax notice as a result.
India is a very important country when it comes to Bitcoin and other cryptocurrencies. Local exchanges generate a high amount of trading volume, which is a positive sign. Unfortunately, local banks have begun freezing exchange’s assets for the time being. There is no indication as to why this is happening or when things will return to normal. To make matters even worse, the Indian income tax department in now probing cryptocurrency investors as well.
Indian Tax Authority Wants to Tax Bitcoin
More specifically, the Indian tax authority has sent notices to cryptocurrency investors. This includes all speculators not including their investments on the recent tax returns. Although India has no official cryptocurrency regulation or taxation guidelines, this development raises some questions. It is unclear what the tax authority is looking for exactly at this point. We do know all local exchanges were surveyed in the process. This seems to indicate the local authorities want to curb cryptocurrency trading in one way or another.
Whether or not this means India will tax capital gains through cryptocurrency, remains to be seen. It would not necessarily be in their best interest to do so. At the same time, taxing Bitcoin grants the cryptocurrency more legitimacy as well. It is a fine line to walk for the tax authority right now. Especially when considering how the government still mulls over cryptocurrency regulation. Taxation guidelines are a part of regulation, in a way. How all of this will play out, remains to be determined.
It is evident the Indian tax authority would like to collect such capital gains tax. A notice was sent out to investors last month regarding this particular development. It seems a lot of people ignored this request, which shouldn’t come as a big surprise whatsoever. Investors are not interested in sharing their cryptocurrency gains or losses with the government. After all, there is no legal requirement forcing them to do so. Until such a guideline is in place, the tax authority will fight an uphill battle.
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