Government of India Warns and trying to tame a technology revolution.

The current political dispensation believes most Indians are evading taxes and hence a strong force is needed to clamp down on this menace. And since the Bitcoin rise, government has sent 5 hundred thousand notices to high net worth individuals (HNIs) under the Annexure to summons under Section 131 of the Income Tax Act.

Press Release by Income Tax Department of India -

“We have sent out summons to HNIs who were trading in bitcoins under Section 131. Right now, it is mostly fact-finding to understand sources of income and whether there is any unreported income arising out of bitcoins,” said an income tax official declining to be named."

The word like "fact-finding" is just a charade.

Whereas tax experts believe -

“This is the first time I-T department is asking so many details. This is based on the presumption that nothing has been disclosed (in case of bitcoins) and hence they want to know everything. It is also looking at the demonetisation period specifically hence the mention of specific dates,” said Gautam Nayak, a Mumbai-based chartered accountant.

Apart from details on period of dealing with cryptocurrencies, the I-T notice seeks extensive information on source of income for the initial investment. The tax department also wants to know in which bitcoin or cryptocurrency exchanges, in India and abroad, does a holder have accounts.

“You as an bitcoin or cryptocurrency holder will have to provide details of all the wallets you are using along with your Unique ID number. The department also wants to know whether you are using physical hardware wallet for storing your bitcoins and other cryptocurrencies,” says the I-T notice. A bitcoin holder will also have to provide balance as on date along with public ID or wallet number on the blockchain account, the notice added.

“In case of gains, you have to state profits or capital gains made by you from transaction in cryptocurrencies year-wise with statements showing the workings. If you are holding bitcoins or other cryptocurrencies as on date, you have to furnish details of the same including the wallet’s public key in which they are kept,” according to the notification. The I-T notice also sought to know whether returns have been filed on gain from sale of cryptocurrencies as income. It asks if you have paid the advance tax for the gains made in the current year.

“You also have to state whether you are buying or selling bitcoins and other cryptocurrencies from websites such as polonies.com, coinable.com, bittrex.com or any other websites registered out of India,” the notice added.

The tax authorities also want to know what was the mode of payment for receiving money out of bitcoin or cryptocurrency sales from websites registered out of India.

“You have to submit details of total purchase and sales of bitcoins and other cryptocurrencies from websites registered out of India. You also have to state whether you are buying or selling cryptocurrencies in cash by making peer to peer transfer. If you are then you have to submit the details of payments made and received along with details of the buyer and seller with his or her public IS on wallet number,” said the notification.

In case a bitcoin holder has made cash transaction for cryptocurrencies on exchanges, he has to submit details of transfer along with details of the platforms. In case the holder is involved in bitcoin mining, he has to give details on “whether you yourself is involved in mining by investing in own physical set up, whether you have invested in cloud mining an hash mining, details of the total investment in mining financial year wise, details of reward fees earned by mining of bitcoins or other cryptocurrenices in a financial year and details of mining companies you have invested into along with the details of reward fees earned financial year wise”.

The Indian government is missing the point that technology is something which cannot be tamed with any measure, it will find it's way. End of the day government is itself trying to use the Blockchain technology in it's banking system.

Moreover, many believe that it's a simple way to launch it's own cryptocurrency "Lakshmi" and so coming down heavy on other crypto currencies will forcibly move current players to it's own currency "Lakshmi". Check this report on launching it's own currency here.

Image Credits - Imgur