The government of India has proposed the Income Tax Bill 2025, which explains the definition of Virtual Digital Assets (VDAs). The bill will replace the Income Tax Act of 1961 and provide a more defined legal framework for digital assets, including cryptocurrencies and non-fungible tokens (NFTs).
How the Income Tax Bill Defines Virtual Digital Assets
The bill classifies digital assets by cryptographic generation and whether they can represent inherent value. This includes cryptocurrencies, NFTs, and other blockchain-based assets.
For the first time, the government has formally identified NFTs as part of the VDA ecosystem. The blockchain-based tokens are unique representations of digital or physical assets, proving ownership in a verifiable manner. While most NFTs are used as collectibles, some others are of financial value and can be exchanged for profits.
The bill provides the Central Government with the power to exempt specific digital assets from this definition through notifications. This gives way to future changes in accordance with changing technology and regulatory requirements.
Reporting and Compliance Requirements for Crypto Transactions
The law introduces new compliance regulations for persons and entities operating with virtual digital assets. It defines funds derived from VDAs as “undisclosed income,” subject to due reporting to the tax authorities.
The entities that conduct crypto transactions have to provide elaborate reports to the department of income tax. But the bill is not clear on the format, the way of submitting the reports, or within what period. Companies will be given 30 days to rectify any discrepancy in their reports. Otherwise, penalties for incorrect information will be imposed.
Failure to meet these reporting requirements may result in enforcement by tax authorities. Such regulations are intended to increase transparency and combat tax evasion within the crypto market.
No Adjustment to the Crypto Tax Rate
In spite of all these new definitions and reporting obligations, the Finance Ministry has not revised the 30% tax on crypto profits. The lack of tax reforms discouraged many in the crypto industry, who had been expecting relief from the onerous taxation rate.
Crypto industry leaders are hopeful about future policy shifts. Arjun Vijay, the founder of Giottus, is of the opinion that greater regulatory interaction may result in a more positive approach to virtual digital assets. He pointed out that incorporating crypto transactions into the income tax system may help build confidence between the government and the industry.
Future Outlook for India’s Crypto Regulations
Web3 and the Indian crypto industry alike continue to demand more transparent policies and regulatory intervention. Although the government recognizes the sector’s development potential, at the same time, it holds risk evaluation and compliance in its priorities.
Utkarsh Tiwari, KoinBX Chief Strategy Officer, emphasized the importance of a balanced approach to regulation. He underlined that policymaking takes time in order to make it inclusive and sustainable. There is a need for cooperation among government agencies, financial institutions, and regulators to create end-to-end guidelines for the digital asset economy.
The introduction of the Income Tax Bill 2025 marks a significant step toward regulating virtual digital assets. While the bill does not introduce immediate tax relief, it establishes a structured legal framework for NFTs and cryptocurrencies. Industry stakeholders remain hopeful that future amendments will foster innovation while ensuring regulatory compliance.
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