Friend got a similar message from the bank. He was using credit card to make USD payments to cex.io. so that qualifies as a remittance - and is against the rules of the bank and FEMA.

As for other FUD spready here - you won't go to prison for this as FEMA is a civil offence only and going after small amounts (<5 lakh) is not worth the RBI or ED's administrative resources.

Regulations are unlikely this year. What may come are the recommendations of the committee, which will create more FUD.

If you haven't sold anything for rupees, you have zero tax liability.
Morally Correct answer: sell now and pay capital gains. I-T will most definitely notice the huge payout and possibly scrutinize/buttfuck you. They are brain-dead and on a witchhunt.
Smart answer: Wait out the witchhunt or think about selling it on localbitcoins for cash bit by bit.
Best answer: HODL and cash out years later in a sane country or buy your kid citizenship of a nice tropical island country with BTC

Yes, you need to pay tax on the amount of capital gains as per the slab (short term or long term).
Taxable event (selling to fiat) happened in the current financial year so you have to pay for this year. It doesn't matter if its bank account or Zebpay account.
Disclaimer - I am not a tax consultant.

Investing is not a taxable event. Selling for rupees is a taxable event. What if someone purchased in current tax year (after April 2017) and did not sell? How does he have tax liability and why would he receive notice for tax evasion?
May I ask the source of this information?

Thanks for the update. As per you, what seems to be the profile of the person getting the notice?
Who is HNI?
Who is "large volume" or "active" trader?
If a person buys BTC in 2017 and does not sell in currency is he liable to get a notice?

People have received notices as per the Hindu. Who is HNI in this context? Who is "active" trader?

What do you mean by Pro users?
What does the I-T department mean by 4-5 lakh HNIs as in the news reports? Who is HNI under their definition?
Considering 20 lakh active traders in India, about 70-80% have registered in the current tax year, so how can they be served notices for evasion??
There is no taxable event for buying, only for selling in rupees, so what do they mean by sending notices to 'investors'?  

So many questions and this all reeks of overreach and tax raj / vasooli.

My suggestion is don't use Bitcoins to remit money. There are FEMA laws governing remittances out of India. Also it is out of the banking channel that can be termed as Hawala.

Bitcoin is a horrible way to hide black money. Would you hide your black money on an irreversible public ledger? The IRS is already using chainanalysis software to triangulate and track Bitcoin. You know what's the best way to hide black money? Cash, followed by Banks. Who helped launder money during Demonetization? Petrol pumps and banks, with licenses from beloved government.
That said, in agreement with your point on ICOs.

This is common FUD across the globe in big countries. Russia still can't make up its mind on how to deal with crypto and Russia is really big on crypto adoption and mining. Even Japanese government had pushback initially. It is the job and nature of ED and RBI to express concerns. Customer protection is their biggest concern followed by Money Laundering - both of which can be addressed by legalizing exchanges with record keeping and KYC requirements and restricting ICOs, Localbitcoins, cloud mining scams - which give a bad name to Bitcoin IMHO.

There have been 10,00,000 downloads on Zebpay and Coinsecure has 100 BTC trading volume per day. I think the cat is out of the bag now to banhammer Bitcoin China-style but who knows?

Fiat gains: I think to be safe, you should pay taxes on fiat money capital gains in India as well.

Crypto trading gains: I don't think there is any tax treatment for crypto-to-crypto trading gains (not booked in fiat) except in the USA, where the IRS has issued guidelines to tax crypto-to-crypto trades

Taxation can be retrospective (e.g. Vodafone case). Not sure if the government will issue guidelines this tax year. My sense is they will treat Bitcoin as "commodity", so capital gains should be paid on fiat gains but not on crypto gains. They "may" ask people to declare their Bitcoin holdings in tax returns although they have not done that yet for gold, property etc.

Thanks Benson. It is good to know Coinsecure has an ethical position.

I read on Sandeep Goenka's reddit AMA in 2016 where he said he will disclose all information when requested. This bothers me about Zebpay - also that they keep all user transactions on a ledger. I think the primary fear is Bitcoin users, being early adopters will become victims of a witchhunt. I am pretty certain that dealing on KYC exchanges is not the preferred route of money launderers and criminals - it may be LocalBitcoins, if at all - but knowing how this government works - they can make scapegoats out of regular users.

You have much faith in Indian policymakers to compare them to US I don't think they like Bitcoin. India has capital controls like China and an ongoing "war" on "black money" (which excludes government employees apparently).

China had a massive adoption of Crypto with a lot of mining. India is still in infancy of adoption so it is much easier for the government to shut down exchanges and ban trading in India without collateral damage. All these things may tempt Government to ban crypto.

But fortunately under current legal framework it is not straightforward to do that. Ratan Tata has invested in Bitcoin remittance startup. It will be a setback for Fintech ecosystem. AP government is part of Ethereum alliance. All these reasons confound government attitude towards Crypto.

Mahim, Benson. You guys are on here. Hoping you will respond.

Zebpay had 500k downloads in May. So this probably involves a lot of users.

My 2 paisa on the topic.

India is not a dictatorship like China, it will take another Mudi government to get there but I digress.

There are laws in India and RBI, government need to work in ambit of law.

To ban Bitcoin government needs to make amendment to ITA act, making exception for Bitcoin as "Virtual currency is not an electronic document". Only center and not RBI can do this. One of the many reasons RBI stays away from Bitcoin is that it cannot amend ITA to ban virtual currency or it may have done so long time back. This is what law firms means by "under current legal framework bitcoin is legal" because it fits the definition of electronic document.

RBI has to amend FEMA, RBI act ot declare it a currency, which I doubt it will do. Declaring Bitcoin currency opens a pandora's box for central banks. This is why RBI wants SEBI to regulate it as "virtual good" or movable property. SEBI is pushing back saying it is not a commodity.

The government can ban Bitcoin but it will need amendments to the act.

Banning is hard to enforce and will push Bitcoin underground. India is not like China and it is not easy for central government to enforce compliance. Remember AP government is part of Ethereum alliance. It is easier for Finmin/government to regulate it, get the taxes and keep an eye on ledgers to track money laundering.

Thanks. I believe this is a fresh request for user information.

The source is here - it is as of July 2017:

https://bitcointalk.org/index.php?topic=213792.140

Can representatives of exchanges please confirm or deny this rumor and elaborate on the transaction threshold, transaction window and nature of request?

Hi,

I am a newbie BTC investor. I am aware of the technology, the laws or lack thereof (sources being Nishith Desai and Naavi.org).

I read on this forum that government authorities have requested user data and profiles from Indian exchanges like Zebpay, Unocoin, Coinsecure since 2013 for those who made $2000 or above in transactions.

If this is true, can any representatives of Zebpay, Unocoin, Coinsecure please clarify the below questions on the nature of the request.

- What qualifies as a "transaction" and how is the limit calculated?
- What is the exact transaction window/timeframe of the request?

I understand its under terms of use and perfectly reasonable request but users should know more about the nature of the request.

Regards,
B.

Income tax won't be a problem if you declar/pay tax. RBI maybe a problem as USD to INR conversion has happened.

Best case scenario - RBI ignores or issues warning. It has work to do.
Worst case scenario - RBI penalizes you 3 times the amount.

Just my 2 cents.