Government to keep strict vigil on Bitcoin trade

People trading in Bitcoin need to take note that a number of government agencies have started keeping a strict vigil them. The Income Tax (I-T) department will issue notices to 4 lakh to 5 lakh high net-worth individuals (HNI) across the country who have been trading in Bitcoin.

The development comes after the IT department conducted surveys at nine such exchanges across the country to check instances of tax evasion. The department sent personnel under the command of the Bengaluru investigation wing, who visited the premises of nine such exchanges in the country including in Delhi, Bengaluru, Hyderabad, Kochi, and Gurugram.

The survey, under section 133A of the Income Tax Act aims to gather evidence for establishing the identity of investors and traders, transaction undertaken by them, identity of counterparties, related bank accounts used, among others.

PTI reported an income tax official as saying that they found out of the estimated 2 million entities registered on these exchanges, about 4 to 5 lakh were ''operational'' and indulging in transactions and investments.

PTI quoted sources as saying that the Bengaluru investigation wing of the tax department, which supervised last week's operations, communicated the information of the individuals and entities found on these databases to eight other such wings across the country for a detailed probe.

''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,'' a senior official privy to the operation said, The Financial Express reported.

He added, about 0.4-0.5 million HNIs and their businesses are being issued notices.

The crackdown on the cryptocurrency exchanges, under section 133 A of the Income Tax Act, comes not only in the wake of the huge spike in the value of virtual currencies of late but also due to suspected money laundering post demonetisation.

According to Inc42 Media, the initiative also the appeared to be linked with Panama and Paradise expose, as investigating teams suspected that some of the black money involved had been channelised through Bitcoins.

It may be recalled that the Panama Papers and the subsequent set of leaks called the Paradise Papers had exposed how the world's HNIs, including politicians and celebrities, had allegedly stashed away money abroad in offshore companies in tax havens.