India Income Tax Department Trains Its Officials To Investigate Crypto

The India Income Tax Department is right now training its officials to investigate cryptocurrencies, as part of an internal guidebook which circulated by the department. This guidebook explains cryptocurrencies, their characteristics, the “dark side of Bitcoin” and the best investigation practices for tax officials.

The latest crypto news also show that the Indian government does not consider cryptocurrencies as legal tender. However, it also has not declared them as illegal from the start. This is why crypto investors are still in doubt on how to show their investments in their annual income tax returns. Because of all this, earning through cryptocurrencies is a grey area for the Indian crypto community.

Earlier this year, we could see that the India Income Tax Department sent detailed notices to some cryptocurrency investors. The department then asked for details on the last three years of their income tax returns, credit as well as debit card transactions and their investment in Bitcoin or other cryptocurrencies.

With a total of 26 questions asked by the India Income Tax Department, 21 of them were related to crypto investment and transacting on cryptocurrency exchanges using paid services via cryptocurrencies, using crypto wallets as well as other topics related to crypto.

Some of the questions included the following:

• “Please state whether you are buying/selling Bitcoins or other cryptocurrencies from LocalBitcoins.com via cash or via peer-to-peer transactions.
• Are you involved in mining by investing in your own physical setup or via cloud mining?
• Have you received any Bitcoin/cryptocurrencies for any sale made/service rendered? Have you declared any such income in previous income tax returns?”

In 2017 and 2018, the India Income Tax Department sent notices to thousands of crypto investors and traders. They also surveyed major crypto exchanges to collect the details of individual crypto traders.

All of the answers of the detailed in-depth questions lie in a guidebook titled “Introduction to Crypto-currencies and Forensic Examination of Bitcoin,” created by India’s Central Board of Direct Taxes. The nation’s tax department has been training its staff since 2017 to investigate any cryptocurrency investments in detail.

From “virtual currency” to “digital currency” and “cryptocurrency,” the book explains how all of these terms have distinct meanings and why it is important to classify them accordingly.