The Union Budget 2025 has introduced stricter tax norms and compliance requirements for taxpayers engaged in cryptocurrency trading. The new measures, announced by Finance Minister Nirmala Sitharaman on February 1, 2025, aim to enhance oversight of virtual digital asset (VDA) transactions while maintaining the existing 30% tax rate on crypto earnings.
The budget has left the crypto sector in India disappointed, as expectations for tax relief and a more favourable regulatory framework were unmet.
A major amendment in Budget 2025 includes categorising virtual digital assets (VDAs), such as cryptocurrencies and NFTs, as part of undisclosed income. This means crypto holdings not properly reported will attract a higher tax rate. The move aligns VDAs with other sources of undisclosed income, including gambling and horse racing earnings.
The government has expanded the definition of VDAs under Section 2(47A) of the Income-tax Act to include “crypto-assets that rely on cryptographic security and distributed ledger technology,” ensuring broader regulatory coverage.
For the first time, crypto transactions will now be subject to search and seizure procedures under tax laws. Previously, cryptocurrency holdings were excluded from such investigations. Now, in cases of tax searches, VDAs found to be unreported will be classified as undisclosed income and taxed at higher rates.
The budget also revises the time limit for completing block assessments related to crypto transactions. As per the amendment, assessments must now be completed within 12 months from the end of the quarter in which the last authorisation for search or requisition was executed.
A significant regulatory change is the introduction of Section 285BAA in the Income-tax Act, 1961, which mandates taxpayers to furnish detailed transaction reports for crypto trading. The government aims to improve transparency and ensure full disclosure of crypto-related income.
These new compliance measures, set to take effect on April 1, 2026, reinforce India’s push toward greater regulation in the digital asset sector. The changes come two years after India brought cryptocurrency under anti-money laundering laws.
Despite calls for tax relief, the government has retained the 30% tax rate on crypto income, with no provision for offsetting losses against other gains. Crypto traders cannot adjust losses from one trade against profits from another or any other source of income. This strict taxation policy continues to pose challenges for crypto investors in India.
In the previous budget, the government excluded crypto futures and options from the proposed increase in Securities Transaction Tax (STT). However, Budget 2025 makes it clear that stringent oversight of the crypto sector will persist.
With these amendments, the Indian government has reinforced its stance on crypto regulation, focusing on compliance, tax transparency, and curbing tax evasion. The cryptocurrency industry in India will now have to adapt to a stricter regulatory and tax environment in the coming years.
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Published on: Feb 4, 2025, 1:43 PM IST
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