The Union Budget 2025-26 proposes an amendment to Section 158B of the Income Tax Act, 1961 (ITA), bringing Virtual Digital Assets (VDA), including cryptocurrencies, under the definition of undisclosed income.
Key Changes:
🔹 Crypto earnings unearthed in search proceedings will now be taxed at 60% + penalty.
🔹 Block Assessment Mechanism applies, allowing tax authorities to assess income for six years prior to the discovery.
🔹 Section 301 of the New Income Tax Bill 2025 also expands the definition of undisclosed income.
What is Block Assessment?
- A special tax mechanism used when unreported income is discovered during searches/investigations.
- Enables scrutiny for six prior assessment years before the search year.
- Allows tax authorities to analyze patterns of non-disclosure and levy penalties.
What This Means for Crypto Investors
- Failure to report crypto holdings & transactions could lead to heavy tax penalties
- VDAs now treated like money, bullion, jewellery, & other valuables under undisclosed income.
- Increased government oversight on crypto transactions.
Action Points for Crypto Holders
- Report all VDA earnings in your Income Tax Return (ITR).
- Maintain accurate records of all transactions.
- Stay updated on compliance regulations.
(Sources: Business Line and Financial Express)
