Bengaluru: In a first-ever move to understand and unearth the extent of transactions/ investments in Bitcoin – the crypto currency – in India, the Directorate of Income Tax (Investigation), Karnataka & Goa on Wednesday piloted fact-finding searches at the nine exchanges of Bitcoin in the country, including two in Bengaluru.
Similar visits were conducted in Bitcoin exchanges in Ghaziabad, Pune, Gurugram, Hyderabad and Kochi with the help of the Income Tax Departments in the respective states under Sec 133A of the Income Tax Act for gathering evidence for establishing the identity of investors and traders, transactions undertaken, identity of counterparties, related bank accounts used, among others.
“Though Bitcoin is a grey area in India (the RBI has not termed it as an illegal tender yet), the transactions in the currency have gone through the roof, from Rs 1,200 crore in the last financial year to '10,000 crore in the current financial year.
The crypto currency is of interest to law-enforcement agencies, tax authorities and financial regulators, who are trying to understand how Bitcoin fits into existing frameworks and to identify people, who are involved in virtual trade. The data is stored in cloud and some of the servers are located outside India but the tax authorities can mine information from the block chain and the Bitcoin wallets," said an official source.
Bitcoin is a virtual world wide payment system, which involves direct peer-to-peer transaction without any intermediary. It is encrypted but safe, where every transaction is verified by network nodes and recorded in a virtual ledger called the block chain, which helps ensure the authenticity of transactions of crypto currency between the two peers and prevents fraud. It is the first decentralised digital currency without any government or bank control. Unlike government-controlled money, which can be inflated, the supply of Bitcoins is limited to 21 millions, and this cannot be changed.
Last month, Finance Minister Arun Jaitley stated that the government does not recognise Bitcoin as legal currency as of now. On December 12, the head of the US Securities and Exchange Commission (USEC) had warned Bitcoin and other crypto currency investors to "beware of scams and criminal activity in the sector".
