Budget 2025: No tax relief for crypto investors, new compliances introduced

Virtual Digital Assets (VDAs) are now classified as undisclosed income. So if unreported crypto gains are detected, tax authorities can levy a 60% tax along with a hefty 50% penalty on the tax amount

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman on February 1, has left the cryptocurrency sector in India disheartened due to the absence of expected tax relief and new compliance requirements. Despite hopes for a more favourable regulatory environment, the budget maintained the existing tax structures and introduced fresh compliance measures aimed at enhancing oversight of digital asset transactions.

 

“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.

 

 

What are new compliances regarding crypto?

 

Finance Minister Sitharaman has proposed the insertion of Section 285BAA in the Income-tax Act, 1961, making it mandatory to furnish transaction details.

 

Sitharaman has also proposed that “virtual digital asset” should be included in defining undisclosed income, under which income from gambling, horse racing, crypto trading used to be reported so far.

 

“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 also expanded the definition of virtual digital assets (VDA) under Section 2(47A) to include “crypto-assets that rely on cryptographic security and distributed ledger technology”, ensuring broader regulatory coverage.

 

These amendments, scheduled to come into effect on April 1, 2026, are designed to enhance compliance and oversight of digital asset transactions in India.

 

“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),” CA Sonu Jain, Chief Risk and Compliance Officer, 9Point Capital (a company providing investment solutions, including Bitcoin ETFs & cryptocurrency ETFs).

 

Two years ago, India brought the cryptocurrency sector under anti-money laundering laws.  In the previous budget, Finance Minister Nirmala Sitharaman excluded crypto futures and options from the proposed increase in Securities Transaction Tax (STT).