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Have You Invested In Bitcoins? Be Ready For An Income Tax Notice!

The grip of Income Tax Department over those who invested in bitcoins in now tightening, and some new developments have taken place in this regard.

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Income Tax Notice

The grip of Income Tax Department over those who invested in bitcoins in now tightening, and some new developments have taken place in this regard.

After raiding 9 bitcoin exchanges in India last week, reports have emerged that IT officials will now send notices to around 4-5 lakh high net worth Indians, for possible reasons of tax evasion using bitcoins as the medium.

It was clear from day 1 that IT Dept. is now aiming to extract some serious tax money from bitcoin traders, and the action proves it.

But, how much tax will they be required to pay now? We try to find some answers here..

Income Tax Notice to Rich Investors Soon Over Bitcoins!

It is now clear, that the IT raids on 9 bitcoin exchanges last week was plainly to figure out who have invested in bitcoins, and how much money have they invested.

Rumors were floating that several tech-savvy rich investors have converted their black money into bitcoins, and basically made them vanish from the Indian tax system. Bitcoin operates on blockchain technology, and nobody controls it.

A senior IT official said,

“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..”

Around 20 lakh investors were found during the raids, and out of them, notices would be sent to 4-5 lakh high net worth investors.

The surveys or raids were conducted under section 133 A of the Income Tax Act and was done for “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,”

How Much Tax Will Bitcoin Investors Pay Now?

GST officials and Finance Ministry is right now studying the different aspects of bitcoin trading, and trying to formulate how much tax should be paid.

As per available reports, 30% capital gains tax is the proposed tax which IT Dept. can apply on bitcoin traders to start with.

Besides, a penalty of 50-200% has also been announced, if any taxpayer fails to declare bitcoin investments in a financial year; and then 12% annual interest on this penalty.

It is still not clear whether these 4-5 lakh bitcoin investors would be charged the penalty or not, because they were ‘found’ after raiding bitcoin exchanges, and they had not ‘declared’ their earnings as such.

Now, the interesting question is: Will Indian Govt. legalize bitcoin trading in India, if tax is paid on the income?

We will keep you updated.

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