The Income Tax department has sent notices to thousands of cryptocurrency investors after a nationwide survey found that transactions worth more than $3.5 billion have been conducted over a 17-month period, Reuters reported.
"Tech-savvy young investors, real estate players and jewellers" were the majority who are trading in bitcoins and other virtual currencies, the I-T department told the news agency after gathering data from nine exchanges in Mumbai, Delhi, Bengaluru and Pune.
In December 2017, the Income Tax Department conducted surveys on nine virtual currency exchanges in Indian cities to gather information about transactions, parties involved and bank accounts used.
The same month, the finance ministry warned against investing in digital currencies calling them are Ponzi schemes that offer high returns to the early investors.
Bitcoin, known to be the world's biggest cryptocurrency, saw a growth of more than 1,700 percent last year. The surge in Bitcoin prices in 2017 attracted more people towards investing in the virtual currency.
Many countries around the world are struggling to regulate cryptocurrency trading. The policymakers are expected to discuss the cryptocurrency issue at the upcoming G20 summit to be conducted in March in Argentina.
Japan and South Korea have been the two biggest markets for cryptocurrency trading. In recent weeks China and Japan called for a regulatory crackdown on the cryptocurrency. The South Korean policymakers are also planning to shut down domestic virtual currency exchanges.
In last September, China has shut down cryptocurrency exchanges in the country. The People's Bank of China has ordered financial institutions to stop providing funding to any activity related to cryptocurrencies. The financial institutions in China are now banned from holding cryptocurrencies.