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Dinesh Sharma, Special Secretary in the Economic Affairs Department and Chairman of the nine-member inter-disciplinary committee, says, "According to the law if somebody makes some money that should be subject to income tax." Realizing the growing popularity of crypto currencies the government formed a committee this year in April to give recommendations for regulating the crypto currency market. The report is yet to come out. Sharma says, "No final decision has been taken but it is under active consideration."
Having said that, mining, buying and selling virtual currencies is not illegal in India, but it is also not recognised by law either. There is a question mark on the taxability aspect too. So if you have been trading or investing do make sure any gains from the sale of Bitcoins is included in your income tax return.
Refer: taxation-bitcoin-india