Income Tax Department of India Secretly Teaches Officials Crypto Investigation Techniques

Government Official Says Digital Currency is Ponzi Scheme and Should Not Be Allowed in India

India’s Income Tax Department has been covertly training the department’s various officials in proper investigations regarding cryptocurrencies. To such a degree than an internal guidebook has been circulated throughout the department. This guidebook aims to explain crypto as a whole. Among other things, the book explains cryptocurrencies and its various characteristics, proper investigation practices for tax officials as well as the “dark side” of the Bitcoin cryptocurrency.

Trapped In Legislative Limbo

India’s government doesn’t recognize cryptocurrencies as a legal tender. Even so, there isn’t any outright banning of the crypto, at least not yet. Stuck in this limbo, crypto investors can’t be sure of how properly show their various investments when it comes to their annual income tax returns. Earning by way of crypto is a very gray area within India at this time, with the crypto community suffering from the ambiguity.

The Indian Income Tax Department had started to send detailed notices to select crypto investors since earlier this year. Within these notices, the department asked for specifics in regards to various subject matters. Among them, their income tax returns over the past three years, as well as their debit and credit card transactions. The department was also keen on recording their investments in various cryptocurrencies.

The Many Awkward Questions

Within this notice, there were 26 questions, 21 of which were related to crypto in some way, be it investments, transactions on crypto exchanges, wallet use, or crypto-paid services. A few of these questions asked whether or not the investor was trading crypto within by way of peer-to-peer transactions. Another asked if the investor was involved in mining, be it through investment, a self-owned setup, or a cloud mining service. The notice also requested if the investor had ever received crypto as a form of payment for products or services rendered and if they declared this in the previous income tax returns.

Long Time Coming

Last year, the tax department did the same, sending thousands of notices to various crypto investors and traders between 2017 and 2018. Before this, the department surveyed significant crypto exchanges, collecting the personal details of individual crypto traders within India’s crypto industry.

The guidebook these questions were based on is aptly named “Introduction to Crypto-Currencies and Forensic Examination of Bitcoin Transactions.” This guide was created by India’s Central Board of Direct Taxes, with the intent of having it help them handle the crypto industry within the country. India’s Income Tax Department has trained its officials in the proper investigation of crypto investments since 2017 by making use of this book.

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      A journalist, with experience in web journalism and marketing. Ali holds a master's degree in finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of cryptocurrency publications.