Budget 2025: Though the Union Finance Minister Nirmala Sitharaman has provided minor relief to middle-class taxpayers, cryptocurrency investors are not granted any respite. Despite industry hopes for tax breaks, the government has decided to maintain the 30% tax on crypto income gains and 1% TDS on transactions.
In Budget 2025, reporting entities such as banks and crypto exchanges are now required to regularly report information on transactions involving crypto assets for both past and future periods. Additionally, the definition of virtual digital assets (VDA) has been updated to encompass any item utilizing crypto-like technology.
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The Budget statement stated: "It is proposed to bring amendment in the Act to provide for that a prescribed reporting entity in respect of a crypto asset shall furnish information in respect of a transaction in such crypto asset, in a statement as prescribed. It is also proposed to align the definition of virtual digital asset accordingly."
“These amendments will take effect from the 1st day of April, 2026,” said the Memorandum to Budget 2025.
Alay Razvi, Managing Partner, Accord Juris, said: “This new broader definition of virtual digital asset (VDA) to cover the cryptos and crypto like technology transactions that fall under VDA. Thus, covering more such VDA assets under this category.”
What has changed after Budget 2025?
> The Securities Transaction Tax (STT) has not been expanded to include crypto futures and options (F&O), maintaining the current taxation status quo.
> FM Sitharaman has suggested the inclusion of Section 285BAA in the Income-tax Act, 1961, requiring the submission of transaction details.
“Sub-section (1) of section 285BAA of the Act states any person, being a reporting entity, as may be prescribed, in respect of crypto asset, shall furnish information in respect of a transaction in such crypto asset in a statement, for such period, within such time, in such form and manner and to such income-tax authority, as may be prescribed,” the Budget statement said.
> Additionally, the FM has proposed that the definition of undisclosed income should encompass "virtual digital assets", previously not included, which covers income from activities such as gambling, horse racing, and crypto trading.
> “It is proposed to add the term ‘virtual digital asset’ to the said definition of undisclosed income of the block period,” the Budget document said.
> “The time-limit for completion of block assessment is proposed to be made as twelve months from end of the quarter in which the last of the authorisations for search or requisition has been executed,” it added.
> The government has broadened the scope of virtual digital assets (VDA) in Section 2(47A) to encompass "crypto-assets that utilize cryptographic security and distributed ledger technology".
> This move aims to extend regulatory oversight and promote compliance in digital asset transactions in India. The amendments are set to be implemented starting from April 1, 2026.
What does this mean?
The government has decided to maintain the 30% tax rate on cryptocurrency income and the 1% TDS on cryptocurrency transactions, which were implemented in July 2022.
Despite the lack of regulation surrounding cryptocurrencies in India, the creation of a separate section for Virtual Digital Assets (VDAs) in ITR forms for the fiscal year 2023-24 indicates the government's efforts to monitor cryptocurrency transactions. However, there is ongoing uncertainty regarding the classification of cryptocurrency F&O, which is currently taxed as business income rather than speculative income like regular VDAs.
“The Union Budget 2025 offers no respite for crypto investors, as taxation policies remain unchanged, maintaining the 30 per cent tax on gains and 1 per cent TDS on transactions. This continues to create liquidity issues, discouraging retail participation and innovation in the sector. The absence of any regulatory clarity or incentives for Web3 startups further dampens investor sentiment,” said Sathvik Vishwanath, Co-Founder & CEO, Unocoin (a cryptocurrency) exchange.
CA Bimal Jain, founder, A2Z Taxcorp LLP, said: “Now banks and others will report crypto transactions on a regular basis to the Income Tax Department. Earlier only if the transaction attracted TDS it could be tracked. Now it's possible all crypto transactions can be tracked via AIS.”
CA Sonu Jain, Chief Risk and Compliance Officer, 9Point Capital, said: “Virtual Digital Assets (VDAs) are now classified as undisclosed income under the Income Tax Act. This means that if unreported crypto gains are detected during an income tax raid or inquiry, tax authorities can levy a 60 per cent tax along with a hefty 50 per cent penalty on the tax amount. Given these stringent penalties, it is crucial for all crypto investors to duly report their gains under the Schedule VDA section of their Income Tax Return (ITR).”