If you are stuck in such a situation, here is what to do.

Mr. Kumar, a young professional from the city of Jaipur, discovered a method to continue using a popular video-sharing application called ‘ClipFlow’, which has been officially banned by the Indian government. By utilizing a Virtual Private Network (VPN) and various proxies, he was able to access the app and generate a steady stream of income from his content. The payments were being routed to his account through an international payment gateway named ‘SwiftPay’. Mr. Kumar is now concerned about the legality of this entire operation. He is particularly worried about how to declare this income for tax purposes without inviting legal trouble, given that the source of the income is an activity that circumvents a government ban.

Advice in such cases

Navigating the legalities of income from activities that exist in a grey area requires caution and strategic planning. Here is some general advice:

• Cease the Activity: The first and most prudent step is to immediately stop engaging in the activity that circumvents the ban. Continuing to earn income from a banned application increases your legal risk and potential penalties.
• Assess Your Exposure: Compile a clear record of all the income received, the dates, and the methods used (VPN, payment gateways). This will help in understanding the scale of the issue and the potential financial and legal liabilities.
• Do Not Ignore Tax Obligations: Under Indian tax laws, all income is taxable, regardless of its source. Intentionally hiding this income constitutes tax evasion, which is a separate and serious offense.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

Several Indian laws come into play in a situation like this:

• The Information Technology Act, 2000 (IT Act): The government bans applications under Section 69A of the IT Act, which allows it to block public access to any information in the interest of sovereignty, integrity, defense of India, security of the State, or public order. While using a VPN is not illegal per se, using it to circumvent a specific government order under Section 69A can be interpreted as a violation of the spirit and intent of the law.
• The Foreign Exchange Management Act, 1999 (FEMA): Receiving payments from abroad is governed by FEMA. While receiving legitimate foreign income is permissible, if the underlying activity for which the payment is received is illegal or against public policy, it can attract scrutiny from the Reserve Bank of India (RBI) and the Enforcement Directorate (ED). The transaction could be flagged as suspicious.
• The Income Tax Act, 1961: The Income Tax Act mandates that income from any source, whether legal or illegal, must be declared and taxed. Not declaring it is a clear case of tax evasion. However, declaring it means admitting to the source of income, which could trigger investigations under other laws like the IT Act and FEMA.
• The Bharatiya Nyaya Sanhita, 2023 (BNS): While a direct charge might be difficult, if the activity involves any form of deception or misrepresentation to the payment platforms or authorities, provisions related to cheating (Section 318 of BNS) could potentially be invoked, although this is less likely than action under the IT Act or FEMA.

If you are the complainant

In this scenario, a “complainant” would typically be a government agency or a concerned citizen reporting such activities. The steps would be:

• Gather Evidence: Collect screenshots, transaction details, user profiles, and any other digital proof showing the circumvention of the ban and the earning of income.
• File a Complaint: Report the matter to the National Cyber Crime Reporting Portal (cybercrime.gov.in) or the local Cyber Crime police station. The complaint should clearly state how the government’s ban is being flouted.
• Provide Technical Details: If possible, provide information about the VPNs or proxies being used, as this can help investigators.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

If you are the victim

If you are the person who has been earning income through such means, you are not a “victim” in the traditional sense, but rather the person potentially in violation of the law. Your primary goal is to mitigate the legal consequences.

• Stop Immediately: Discontinue all activities related to the banned app and the receipt of payments.
• Preserve Records: Keep a clean and honest record of all transactions. Do not attempt to delete or alter records, as this can be viewed as destruction of evidence and lead to more severe charges.
• Seek Legal and Financial Advice: This is a complex situation involving technology, finance, and law. You need coordinated advice from both a lawyer and a chartered accountant.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think. A lawyer specializing in cyber and financial laws can advise on the best course of action, which might include voluntary disclosure to tax authorities with a carefully worded explanation.

How the police behave in such cases

The authorities’ approach can vary. While they may not actively pursue every individual user, large-scale operations or high-value transactions are likely to be investigated. If an investigation is initiated, you can expect the following:

• Notice Issuance: The Cyber Crime Cell or Economic Offences Wing may issue a notice under the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), summoning you for questioning.
• Information Requisition: They will contact banks and payment gateways like ‘SwiftPay’ to get your transaction history and KYC details.
• Seizure of Devices: Your electronic devices, such as laptops and mobile phones, may be seized for forensic analysis to gather evidence of VPN usage and access to the banned application.
• Focus on the Money Trail: The investigation will primarily focus on the flow of money, its origin, and its end-use to rule out more serious offenses like money laundering.

FAQs people normally have

• Is it illegal to use a VPN in India?
  No, using a VPN is not illegal in itself. However, using a VPN to commit a crime, hide illegal activities, or circumvent a specific legal order (like the ban on an app) is illegal.
• What are the potential penalties?
  Penalties can range from fines under the IT Act and FEMA to prosecution for tax evasion under the Income Tax Act. The exact penalty depends on the amount of money involved and the interpretation of the law by the authorities.
• Can I just pay the tax on the income and be safe?
  Paying tax is necessary but not sufficient to grant you immunity. Declaring the income means you are officially putting on record that you earned money from a source that is a byproduct of circumventing a government ban. This can act as a self-admission and trigger scrutiny from other law enforcement agencies.

What evidence is required?

For authorities to build a case, they would require:

• Digital Evidence: Logs from internet service providers, VPN service records (if obtainable), and forensic data from your devices showing access to the banned ‘ClipFlow’ app.
• Financial Evidence: Statements from your bank, transaction history from ‘SwiftPay’, and any communications related to the payments.
• Your Own Admission: Any statements made to the police or declarations made to the Income Tax department can be used as evidence against you.

How long will the investigation take?

An investigation of this nature can be prolonged. It involves coordination between multiple agencies, including the police, banks, and potentially international payment gateways. A simple inquiry might take a few months, but a detailed investigation could easily extend for more than a year, especially if it involves forensic analysis and tracking international financial transactions.

Advocate Sudhir Rao, Supreme Court of India