ok. the summary seems to be that using bitcoins for legal purposes is fine, but tax should be paid on the bitcoins possessed when acquired.
any sale of it would levy capital gains tax. so, even if we don't sell bitcoins, we should still declare and pay tax on it.

if after filing income tax,there is an audit and we are asked to prove our possession of the declared amount of bitcoins, how would we do that?
1. we would need to prove how the bitcoins were acquired (purchase invoice, service invoice, etc.)
2. we would need to prove ownership of said address ()

i'm sure the exchanges in India are going through this.  any opinions here?