The Income Tax Authority of India just doesn’t seem to be consented with the free flow of the crypto under its national territory. According to NDTV, one of the biggest news source in India, the Income Tax (IT) department is planning to widen its investigation of bitcoins by issuing notices to approximately 4-5 lakh HNI (High Net Worth Individuals) who have been using this unregulated crypto mode for entering into trading on a rampant scale.

Surveys have been conducted by the taxman last week at nine such exchanges to examine instances of tax evasion. Official sources of the department have revealed that they have found about 20 lakh entities who are registered on these exchanges. Four to five lakhs of them have been actively indulging in investments and transactions. The Bengaluru investigation wing of the Income tax department have dispatched the information gathered through their earlier probe to eight other wings of the Income Tax department across the country for an in-depth survey.

A senior official engaged in the investigative operation has revealed that:

“Those individuals and entities whose records were recovered by the department are now being probed under tax evasion charges. Notices are being issued and they will have to pay capital gains tax on the bitcoin investments and trade.”

The Income Tax departments also probes into the cryptocurrency exchanges in India in order to ascertain the rate of tax under the GST regime.

The notices sent to 4-5 HNIs will primarily seek out their financial details and thereafter establish the tax demand if any. The action has been taken by the IT department as per existing provisions since virtual currencies such as Bitcoins have been deemed unregulated in the country.

The survey operations u/s 133 A of the Income Tax Act which took place last week were carried forward with main intention of, “gathering evidence for establishing the identity of investors and traders, the transaction undertaken by them, identity of counter-parties, related bank accounts used, among others,” revealed the department officials. Under the IT law, a survey action refers to conducting a surprise visit to the official premises of the party under the scanner of suspicion.

The main reason behind such investigative glares has been the meteoric rise in the price of bitcoin in recent past. The suspected conversion of black money into white after the demonetisation drive by using the bitcoin mode is also being examined by the department officials. Unlike banks and financial institutions, Bitcoin is not yet regulated by any central authority which has evolved as a cause of concern amongst regulators across the globe. Since these currencies are available in virtual mode, it also becomes imperative to hold the same in virtual wallets which at times might fall prey to the clasps of malicious hackers.

The Reserve Bank of India (RBI) has issued wordings of caution to crypto users, holders and traders propagating the risks involved with the same. At a time when government bodies around the globe were choosing their ultimate stand whether in for of or against Bitcoins, the Indian government revealed that they do not recognise the same as a legal-tender.

An Inter-Disciplinary Committee was constituted by the Union finance ministry in march for taking stock of status of cryptocurrencies both nationally and internationally as well as suggest way outs for dealing with the same. A report had already been submitted by the committee which is being examined by the supreme authorities at present.

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