Crypto Earnings Under Scrutiny: New Income Tax Bill Labels Virtual Assets as 'Undisclosed Income'
The Indian government is tightening its grip on virtual digital assets (VDAs) with the upcoming Income Tax Bill, scheduled to be tabled on February 13. According to a report, the bill categorizes cryptocurrencies as ‘undisclosed income’ during searches, placing them alongside traditional assets like gold and bullion.
The proposed legislation expands the definition of ‘undisclosed income’ to encompass ‘money, bullion, jewelry, virtual digital assets, or other valuable articles,’ along with expenditures and income linked to any entry or transaction representing undisclosed earnings. It also includes expenses, exemptions, deductions, or allowances claimed under the Income Tax Act that are later found to be incorrect, as per a Moneycontrol report citing a copy of the bill.
Cryptocurrencies Under the Scanner
The bill defines Virtual Digital Assets as any information, code, number, or token that is neither Indian nor foreign currency but is created through cryptographic methods or otherwise and can be electronically transferred, stored, or traded. This definition explicitly includes non-fungible tokens (NFTs) and other similar digital tokens, regardless of their naming conventions.
However, the Central Government retains the power to exclude certain digital assets from this classification through notifications, subject to specified conditions.
No Change in Taxation on Crypto Earnings
Despite the new categorization, the bill maintains the existing taxation structure for cryptocurrencies and VDAs. The 30% tax on income derived from the transfer of such assets remains unchanged, with no scope for deductions or exemptions. Additionally, the one percent Tax Deducted at Source (TDS) on payments made for the transfer of digital assets continues to be imposed.
Ongoing Discussions on VDA Regulations
Since 2023, the Finance Ministry has been working on a discussion paper to gather input from stakeholders regarding the taxation of VDAs. This paper is expected to offer recommendations on the regulatory framework for cryptocurrencies in India, reflecting the government’s evolving stance on digital assets.
As the new Income Tax Bill awaits its tabling, the Indian crypto community is closely watching how these regulations will shape the future of digital asset investments and transactions in the country. With increased scrutiny, crypto holders must stay vigilant and ensure compliance with the latest tax norms to avoid potential legal repercussions.