New Income Tax Bill to consider crypto as 'undisclosed income' during searches

According to CoinGecko, a crypto data aggregator platform, the global cryptocurrency market cap today is $3.45 Trillion, 28.2% higher than a year back.

The new Income Tax Bill - set to be tabled on February 13 - has included virtual digital assets, also called cryptocurrencies in the category of 'undisclosed income' during searches, apart from the existing ones such as gold and bullion.

As per the new tax bill, 'undisclosed income' includes 'money, bullion, jewellery, virtual digital asset or other valuable article' or expenditure, income based on any entry or transaction, where such entry wholly or partly represents income which has not been disclosed.

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It also includes expense, exemption, deduction or allowance claimed under the Act and found to be incorrect, as per a copy of the Bill accessed by Moneycontrol.

Virtual Digital Assets refer to any information, code, number, or token, which is not an Indian or foreign currency, generated through cryptographic means or otherwise, and that can be transferred, stored or traded electronically.

The tax bill specifically includes a non-fungible token, or NFT, and any other token of similar nature, by whatever name is called.

The new bill provides that Central Government may, by notification, exclude any digital asset from this definition, subject to specified conditions.

The new bill, as expected, has not made any changes to taxing cryptocurrencies or virtual digital assets, as it will continue to attract a 30 percent tax on any income from the transfer of such assets without any deductions and exemptions. The one percent Tax Deducted at Source (TDS) on payments made for transfer of digital assets will continue to be imposed.

Since 2023, the Finance Ministry has been working on a discussion paper to seek comments and views from stakeholders on taxing VDAs. This paper will contain suggestions on the remit of regulation of cryptocurrencies in India.