Government sends tax notices to cryptocurrency investors as trading hits $3.5 billion

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– The government has issued repeated warnings against digital currency investments
– Tech-savvy young investors, real estate players and jewellers are among those invested in bitcoin and other virtual currencies

The government has sent tax notices to tens of thousands of people dealing in cryptocurrency after a nationwide survey showed more than $3.5 billion worth of transactions have been conducted over a 17-month period, the income tax department said.

Tech-savvy young investors, real estate players and jewellers are among those invested in bitcoin and other virtual currencies, tax officials told Reuters after gathering data from nine exchanges in Mumbai, Delhi, Bengaluru and Pune.

Governments around the world are grappling with how to regulate cryptocurrency trading, and policymakers are expected to discuss the matter at a G20 summit in Argentina in March.

The government has issued repeated warnings against digital currency investments, saying these were like “Ponzi schemes” that offer unusually high returns to early investors.

But it has not so far imposed curbs on an industry estimated to be adding 200,000 users in India every month.

B.R. Balakrishnan, a director general of investigations at the income tax department in the southern state of Karnataka, said notices were sent following the survey to assess the penetration and patterns of virtual currency trade.

“We cannot turn a blind eye. It would have been disastrous to wait until the final verdict was out on its legality,” he told Reuters.

The tax department has asked people dealing in bitcoin and other virtual currencies such as ethereum and ripple to pay tax on capital gains. They have also asked for details about their total holdings and the source of funds in the tax notice seen by Reuters.

“We found that investors were not reflecting it on their tax returns and in many cases, the investment was not accounted for,” Balakrishnan said.

Bitcoin, the world’s biggest cryptocurrency, soared more than 1,700 percent last year, hitting a record high just shy of $20,000 as institutional and retail investors around the world snapped up the virtual currency.

Its huge gains have attracted the attention of global regulators tasked with protecting investors from fraud.

In recent weeks, Japan and China have made noises about a regulatory crackdown, while South Korean policymakers said they were considering shutting down domestic virtual currency exchanges.

REGULATION

An Indian finance ministry official said a federal committee was looking into the possibility of imposing restrictions on virtual currencies and that eventually parliament would have to legislate a regulatory regime.

Officials at Zebpay, India’s leading bitcoin exchange, said the industry was adding near 200,000 users every month with an estimated trade volume of about 20 billion Indian rupees ($315 million).

“Many of our customers are treating digital currency like gold,” said Zebpay co-founder Saurabh Agarwal.

Aman Kalra, marketing head of Coinsecure, a bitcoin exchange in New Delhi, said more than 150 bitcoins were changing hands every week through its platform. The company has 100,000 registered users and is now launching a platform to sell ethereum and other digital currencies.

“I don’t think anyone in the government should label our business as a ‘Ponzi scheme’, we are not doing anything illegal,” said Kalra.

Tax inspectors said they sought help from experts in blockchain, the technology that underpins bitcoin, to conduct the survey.

In some cases, tax officials themselves participated in the trade to identify loopholes after they found investors had poured in billions of dollars through unregulated exchanges.

Source: Times of India

Direct tax mop-up jumps 19% in FY18

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Direct tax collections during the first nine-and-a-half months of the current fiscal have risen by 18.7% to Rs 6.89 lakh crore, the tax department said on Wednesday.

The collections till January 15, 2018 represent over 70% of the Rs 9.8-lakh-crore revenue target from direct taxes, the Central Board of Direct Taxes (CBDT) said in a statement.

 

Gross collections (before adjusting for refunds) have increased by 13.5% to Rs 8.11 lakh crore during April, 2017 to January 15, 2018. Refunds amounting to Rs 1.22 lakh crore have been issued during this period.

Stating that there has been “consistent and significant” improvement in the position of direct tax collections during the current fiscal, the CBDT said the growth rate of total gross collections has improved from 10% in Q1, to 10.3% in Q2, to 12.6% in Q3 and to 13.5% as on January 15, 2018.

Similarly, the growth rate of total net direct tax collections has climbed up from 14.8% in Q1, to 15.8% in Q2, to 18.2% in Q3 and to 18.7% as on January 15, 2018.

The growth in corporate tax collections has risen from 4.8% in the first quarter of current fiscal to 10.1% in Q3 and 11.4% as on January 15, 2018.

Similarly, the growth rate of net corporate tax collections increased from 10.8% in Q2 to 17.4% in Q3 and to 18.2% as on January 15, 2018.

 

Source: Times of India

Unexplained deposits in focus, taxmen ordered to go all out in the next three months

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About two months ago, tax offices were directed to accept only those revised tax returns where there is a “bonafide inadvertent error” or “a mistake” on the part of the assessee.

The income-tax department will in all likelihood go into overdrive in the next three months with the Central Board of Direct Taxes — the apex body — alerting all senior tax officials that their performance is being “monitored at the highest level.” It will also give a renewed push towards imposing and recovering tax on Rs 3 lakh crore deposit, which is suspected to be the quantum of unexplained cash parked with banks post demonetisation.

“There will be searches, surveys, information verification, and follow-ups. Explanations on ‘cash in hand’ amounts are being sought from different kinds of assessees, and not just from large establishments and jewellers… We will be knocking on many doors even if our respective targets are met,” a senior tax officer told ET.

This was broadly the message conveyed by the CBDT chief during a recent video-conference with tax officials.According to another person in the department, direct tax offices in various circles may be required to go full steam due to a drop in GST collection following cut in tax rates and refunds.

‘Dispose of Appeals Before March 31’
Till now many in the department were caught up with assessments pertaining to notices which were sent in September 2015 (for the financial year 2014-15) as these matters were getting time-barred in December 2017. Now, tax officers have the time to focus on recovery till March 31. “A possible slowdown in income tax refund, directing the CIT Appeal to dispose of appeals confirming the additions, investigating cases where assesses have deposited more than Rs 10 lakh in demonetised notes may push up gross collection. But does this really reflect the true state of tax collection in a slowing economy where the GDP growth rate is admitted to have come down,” said senior chartered accountant Dilip Lakhani.
In some of the large tax collection zones like Mumbai, the chief commissioner has written to several offices of the commissioner of income tax (Appeals), which is the first appellate authority, to dispose of many appeals before the close of the financial year.

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Tax authorities technically have the power to come down heavily on those who are unable to explain their cash deposit by slapping 60% tax and penalty – even though the process could take some time.

About two months ago, tax offices were directed to accept only those revised tax returns where there is a “bonafide inadvertent error” or “a mistake” on the part of the assessee. This was to tax the unaccounted cash that was deposited after demonetisation (of high denomination currency bills in November 2016) and subsequently regularised through a revised return and payment of tax on it at the normal rate of 30%.

However, the communique to tax officers guidelines were only suggestive in nature as the law allows filing of revised return due to various reasons including an intention to conceal income.

Here’s why India has decided to crank up its crackdown against Bitcoins

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I-T department issues notices to 4 lakh high networth individuals across the country who were trading in bitcoins on exchanges

Here’s why India has decided to crank up its crackdown against Bitcoins

The rising craze for bitcoin, a cryptocurrency that has rocketed to shocking highs, has come under the government’s lens. Bitcoin can be an easy way to evade tax or snare unsuspecting small investors in ponzi schemes. The government has begun a crackdown on illegal uses of this unregulated virtual currency.

Widening its probe into bitcoin investments and trade, the Income Tax (IT) department is set to issue notices to 4 to 5 lakh high networth individuals (HNI) across the country who were trading on the exchanges of this unregulated virtual currency, the PTI reported.

The move comes after the IT department conducted survey operations last week at major bitcoin exchanges across the country on suspicion of alleged tax evasion. These operations were undertaken for gathering evidence for establishing the identity of investors and traders, the transaction undertaken by them, identity of counter-parties and related bank accounts.Earlier this month, there was a spurt in the value of bitcoin. It rose from under $10,000 at the start of the year to close to $20,000, before a sharp 20 per cent plunge within hours.

In addition to financial risks—the value of bitcoins has seen huge falls within hours—the regulators are worried about their use for illicit and illegal activities, subjecting the users to an unintentional breach of laws against money laundering and terror finance.Concerns also emanate from some unscrupulous entities indulging in illicit money-pooling activities—commonly known as ponzi schemes—with the promise of huge returns from investment in bitcoins and other variants, which they claim are minted through blockchain, a distributed ledger technology that was created to mint bitcoins and comprises of extremely complex algorithms with several thousand nodes for each chain.

There is a suspicion that some so-called cryptocurrencies and bitcoin investments may actually have nothing to do with any blockchain-developed virtual currency and are just new ways devised by scamsters to ride the wave and what they may be offering could be ‘e-ponzi’ schemes.

The financial regulators are worried that a complete lack of regulatory regime for such cryptocurrencies may give rise to ‘e-ponzi’ schemes.

The financial sector watchdogs, including RBI and Sebi, as also various government agencies, will soon get into a huddle to prepare a framework to safeguard the gullible investors and to clamp down on the fraudsters who may try to manipulate the regulatory gaps, PTI reported, quoting a senior official.

There are quite a few proposals on the table and those include applying to cryptocurrencies the existing regulations aimed at checking the spread of ponzi schemes or illicit money-pooling activities, money laundering and black money generation and circulation, another official said.

The jury is still out on whether such virtual currencies should be allowed as legal payment tender or investments, though there are also suggestions from some quarters for allowing them with necessary checks and balances.

You can shift residence, fudge address but you can’t avoid income tax notice anymore

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Avoiding income tax notices by fudging addresses or shifting residence will now become difficult. Income tax rules have been amended that will allow the tax department to deliver notices to assessees at addresses given by them to banks, insurance companies, post offices etc in case the notice is undeliverable at the address supplied to the tax department.

The government issued a notification dated December 20, 2017 amending the Income Tax Rules to ensure that all notices, summons, requisitions or any other communication issued in your name is delivered to you either via post or e-mail.

As per the notification, in case the communication or notice to be served to the assessee cannot be delivered/transmitted to the available address, as per Rule 127 of the Income Tax Rules, the government may use the address mentioned in the following databases to deliver the communication:
a) Address given by you to the bank;
b) Address given by you to the insurance company;
c) Address given by you to the post office while investing in the Post Office schemes;
d) Address as available in government records;
e) Address available in the records of local authorities;
f) Address of the assessee as furnished in Form 61 to the income tax department under Rule 114D;
g) Address as furnished in Form 61A to the tax department under rule 114E.

As per the earlier norms, the communication to the assessee was sent through post or email at the any of the following addresses:

a) Address available in the PAN database;
b) Address available in the income tax return (ITR) to which the communication pertains to;
c) Address as available in the previous year’s ITR;
d) E-mail address available in the ITR for which communication pertains to;
e) E-mail address as available in the last ITR;
f) Any e-mail address available with the income tax authority.

The notification has been published in the Gazette of India by the Minsitry of India vide Notification No. 98/2017/F. No. 370142/36/2017-TPL

Link: Economic Times

I-T notices to 4-5 lakh individuals trading in bitcoins across the country

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I-T department is set to issue notices to 4 to 5 lakh high networth individuals across the country who were trading in bitcoins on exchanges. Last week, the department had conducted surveys across major cities

Widening its probe into bitcoin investments and trade, the Income Tax (I-T) department is set to issue notices to 4 to 5 lakh high networth individuals (HNI) across the country who were trading on the exchanges of this unregulated virtual currency.

The taxman had conducted surveys at nine such exchanges last week to check instances of tax evasion.

The department, official sources said, found that out of the estimated 20 lakh entities registered on these exchanges, about 4 to 5 lakh were “operational” and indulging in transactions and investments.

Sources told PTI that the Bengaluru investigation wing of the tax department, which supervised last week’s operations, has now dispatched 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.

About 4-5 lakh HNIs and their businesses are being issued notices which will first seek their relevant financial details and subsequently establish the tax demand, if any, he said.

As the bitcoins or the virtual currencies (VCs) are illegal and unregulated in the country as of now, the IT department has taken action as per the existing provisions, they said.

The survey operations conducted last week, under section 133 A of the Income Tax Act, were undertaken 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,” they said.

A survey action under the IT law pertains to the tax officials making a surprise visit to the business premises of the party under action but not their residential ones. The trigger for the action is understood to be the huge spike being registered in the value of bitcoins and other virtual currencies in the recent past.

Suspected black money being converted into white, post demonetisation, through the use of bitcoins was also under the department’s scanner, officials said. Earlier this month, there was a spurt in the value of a bitcoin. It rose from under $10,000 at the start of the year to close to $20,000, before a sharp 20 per cent plunge within hours.

Bitcoin, a virtual currency, is not regulated in the country and its circulation has been a cause for concern among central bankers the world over for quite a while now.

 The Reserve Bank of India (RBI) has also cautioned users, holders and traders of virtual currencies. The government has also said that it does not recognise ‘crypto-currency’ as legal tender in India. In March, the Union finance ministry constituted an Inter-Disciplinary Committee to take stock of the present status of virtual currencies both in India and globally and suggest measures for dealing with them.

The committee has submitted its report which is being examined.

The RBI has cleared its stand on cryptocurrencies since long. “There is no underlying or backing of any asset for VCs. As such, their value seems to be a matter of speculation. Huge volatility in the value of VCs has been noticed in the recent past. Thus, the users are exposed to potential losses on account of such volatility in value,” the central bank had said in a December 24, 2013 note.