The new Income Tax Bill, set to be tabled on February 13, proposes to classify virtual digital assets (cryptocurrencies) as ‘undisclosed income’ during searches, alongside existing categories like gold and bullion.
Under the new tax bill, ‘undisclosed income’ includes money, bullion, jewelry, virtual digital assets, or other valuable articles, as well as income or expenditures linked to any entry or transaction that partially or fully represents undisclosed earnings.
It also covers expenses, exemptions, deductions, or allowances claimed under the Act that are later found to be incorrect, according to a copy of the Bill accessed by Moneycontrol.
Virtual Digital Assets (VDAs) include any information, code, number, or token—excluding Indian and foreign currencies—generated through cryptographic methods or other means, which can be transferred, stored, or traded electronically.
The tax bill explicitly includes non-fungible tokens (NFTs) and any other similar tokens, regardless of their name.
It also grants the Central Government the authority to exclude certain digital assets from this definition through a notification, subject to specified conditions.
As expected, the bill does not introduce any changes to the taxation of cryptocurrencies or virtual digital assets. Income from the transfer of such assets will continue to be taxed at 30% without any deductions or exemptions. Additionally, the 1% Tax Deducted at Source (TDS) on payments for digital asset transfers remains in effect.
Since 2023, the Finance Ministry has been preparing a discussion paper to gather feedback from stakeholders on the taxation of virtual digital assets (VDAs). The paper will also outline suggestions regarding the regulatory framework for cryptocurrencies in India.
