Arun Jaitley had stressed that cryptocurrencies are not legal tender and that the govt. would clamp down on illegal transactions done using the medium.

The Income Tax Department has issued one lakh tax notices to people who have invested in cryptocurrencies such as Bitcoin, Central Board of Direct Taxes Chairman Sushil Chandra said.

The tax department reportedly conducted a nation-wide survey which showed that Indians had conducted $3.5 billion worth of transactions on the various cryptocurrency exchanges in operation in India over a period of 17 months.

“People who have made investments [in cryptocurrency] and have not declared income while filing taxes and have not paid tax on the profit earned by investing, we are sending them notices as we feel that it is all taxable,” Mr. Chandra said while speaking at an Assocham event. “We found out that there is no clarity on investments made by many people which means that they have not declared it properly,” he added.

Also Read Jaitley’s view on crypto currencies splits opinion

This action comes just days after the presentation of the Budget by Finance Minister Arun Jaitley, who, in his speech, stressed that cryptocurrencies are not legal tender and that the government would clamp down on illegal transactions done using the medium.

However, industry players say that the action taken by the Income Tax Department still does not mean that holding cryptocurrencies in India is illegal.

“You see, the Finance Minister and the RBI have both clarified that cryptocurrencies are not legal tender,” the CEO of one of India’s cryptocurrency exchanges said on the condition of anonymity. “This means that you cannot use it in place of the rupee. But he did not say anything about investing in it as an asset. This action by the tax department is only against those who made investments but did not declare in their returns. It would have been the same if they had invested in any other asset and didn’t declare it.”

India is a very attractive market for cryptocurrency companies, both domestic and international. A worldwide study of the market by Malaysian firm Pundi X, which is looking to enter the Indian market, found that India accounts for 10% of the global trade in cryptocurrencies.

Bitcoin, the most popular cryptocurrency, saw its value soaring 1,700% over the course of 2017 to settle at about $20,000.