I-T crackdown on bitcoin dealers

In the first such move against bitcoin dealers, the income-tax (I-T) department on Wednesday conducted surveys in Delhi, Mumbai, and Hyderabad. I-T investigative teams began surveys to gather information related to the dealer’s source of income, bank accounts, and tax liability, among others, amid tax evasion concerns.

Although a clarification from the government on bitcoin regulation and taxation is awaited, a source in the I-T department said capital gains tax must be paid on profits made from the sale of bitcoins. “Bitcoins are not recognised as currency. So, capital gains tax liability arises at the time of sale of bitcoins on gains made on it, whether held for short-term or long-term. They are not tax exempt,” the official said.

Short-term capital gains tax of 30 per cent is likely to be levied if bitcoin is held for less than three years and 20 per cent if held for longer than 36 months.

Another official warned that not declaring earnings from bitcoin while filing I-T returns could attract penalty and interest. A penalty of 50-200 per cent could be levied during assessment, under underreporting or misreporting of income. Besides, an interest of 12 per cent per annum could also be imposed.

“The surveys on bitcoin dealers will continue for some time. We are gathering information. We are examining whether they are paying taxes — on capital gains or business income — whatever applicable,” said a government official.