The Indian Budget 2025 brought both continuity and change to the taxation of cryptocurrency income, leaving investors with a complex landscape to navigate. While the 30% tax on crypto gains and 1% TDS on transactions remain unchanged, the government has introduced measures to tighten monitoring and reporting of crypto transactions.
Key Highlights on Crypto Income Budget
- No Change in Tax Rates: The 30% tax on income from the transfer of virtual digital assets (VDAs), including cryptocurrencies, continues to apply. This means that any profits from buying and selling crypto will be taxed at this rate.
- TDS Remains: The 1% TDS on crypto transactions above ₹10,000 for salaried individuals and ₹50,000 for business entities also stays in place. This ensures that a portion of the transaction value is deducted as tax at the source itself.
- Widened Definition of VDAs: The definition of VDAs has been expanded to include any crypto-asset which is a digital representation of value based on cryptographically secured distributed ledger technology. This clarifies the scope of taxation and brings more crypto-assets under the tax net.
- Tighter Monitoring: The Budget 2025 has proposed to tighten certain rules for crypto trading. Income from VDAs will now be considered part of undisclosed income under the Search and Seizure provisions. This means that tax authorities can take stricter action against those who fail to report their crypto income.
- Mandatory Reporting: New section 285BAA has been inserted in the Income Tax Act, mandating reporting entities dealing in crypto-assets to furnish information on transactions related to such assets. This means that crypto exchanges and intermediaries will have to report details of crypto transactions to the income-tax authorities.
- No Relief for Losses: The provision that losses from VDAs cannot be set off against any other income, nor can losses from one VDA be offset against gains from another, continues to apply. This can be a significant disadvantage for crypto traders who incur losses.
Impact on Investors:
- Increased Compliance: The mandatory reporting requirements will increase the compliance burden for crypto exchanges and intermediaries. They will need to invest in systems and processes to collect and report transaction data to the tax authorities.
- Greater Transparency: The increased monitoring and reporting requirements will bring greater transparency to the crypto market. This could help to reduce tax evasion and make the market more mature.
- No Change in Tax Liability: For individual investors, the tax rates and TDS provisions remain unchanged. However, they will need to be more careful about reporting their crypto income to avoid scrutiny from the tax authorities.
Overall, the Budget 2025 has sent a mixed message to the crypto industry. While the government has not introduced any new taxes or changed the existing rates, it has made it clear that it is keeping a close eye on the sector. The increased monitoring and reporting requirements could be seen as a sign that the government is preparing to introduce more comprehensive regulations for the crypto market in the future.
Disclaimer: This article is for informational purposes only and should not be considered as financial or investment advice. Please consult with a qualified professional before making any investment decisions.