It seems that the Indian authorities want to regulate the local Bitcoin exchange, in order to prevent money laundering. But it was quite confusing when one official said that even Bitcoin mining would be taxed.
It is income, no? (Net-profitable) mining is taxed in the USA as well.
On the other hand, I wonder if they can enforce it. India has an enormous black-money problem already (such that it's often impossible to buy/sell real estate without using it) and the political will to do something about it - from what I hear - is not very strong. In that environment, I imagine that a large portion of BTC transactions would be in black, localbitcoins style, and thus not really regulable as things are today.
