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Is India’s Income Tax Department Tracking your Cryptocurrency Transactions?

The RTI raised asking the question in March was forwarded twice before being rejected by the Income tax Investigations Department.

On March 22, I created an RTI query addressed to the Central Board of Direct Taxes (CBDT) asking them two questions:

  1. Please tell us if the tax department is using any tools to track cryptocurrency transactions in India. If yes, what are they.
  2. Please tell us how does a trader need to calculate tax for profits made from Cryptocurrency trading.

Typically every RTI receives a response after 3 weeks, sometimes exactly on the 30th day which is the last day for responding. As such, I received a notification on April 20, that the RTI was forwarded to another “public Authority”.

The RTI was now in the hands of Directorate General of Income Tax (Systems) as on April 20.

On April 24, the RTI was once again forwarded, this time to Directorate General of Income Tax (Investigations).

On May 21, the RTI was “Rejected”. I received the physical copy of the response on June 02, 2020.

RTI raised by Coin Crunch on whether Income tax Department is tracking crypto transactions

Is the Income Tax Department Tracking Cryptocurrency Transactions?

The RTI was rejected by the DGIT (Inv.) under Section 24(1) of the RTI Act, 2005. DGIT(Inv) as an intelligence and security organization, is excluded from the purview of the RTI Act.

So we do not have an official answer on if the Income Tax Department is tracking Crypto transactions. However, there is evidence that they are aware and vigilant.

Back in 2018, the CBDT ordered publication of a book titled “Introduction to Cryptocurrencies and Forensic examination of a Bitcoin transaction.”

In December 2017, the Income tax department “surveyed” Crypto exchanges across six different cities, questioned the founders, employees and acquired the data of all the traders from these exchanges. Following this incident, lakhs of people received comprehensive notices from the income tax department.

On March 15, 2018 Zebpay was investigated under the order of Ministry of Corporate Affairs, “to examine inter alia the aspect of dealing in Bitcoin.”

The RTI response may have been inconclusive but there is ample evidence that the income tax department is fairly aware of how cryptocurrencies are being used in India. As a citizen, if you’re paying income tax, you are likely to not be bothered.

The RTI response can be found here.

Are you liable to Pay Income Tax on Gains from Crypto?

CBDT cares that every citizen pays the tax on their income. An answer in the parliament says “Under the existing provisions of the income-tax Act, 1961, the gains arising from
the transfer of cryptocurrencies is liable to tax depending upon the nature of holding of the same.”

Here’s our article on how to calculate Income Tax on Crypto Gains:

Cover Image by Msporch from Pixabay

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