Context: For the first time in India, the Income Tax Bill, 2025 explicitly treats Virtual Digital Assets (VDAs) as property and capital assets.

Background:

• The bill categorically states that VDAs, which include crypto assets, Non-Fungible Tokens (NFTs), and similar digital assets, should be considered property. This move aligns India with global practices, where digital assets are either classified as securities (like in the U.S.) or property (like in the U.K., Australia, and New Zealand).

Key Points

• VDAs are classified as capital assets. This means that any gains arising from their sale, transfer, or exchange will be taxed under capital gains provisions, similar to real estate, stocks, and bonds. 
• For example, if an individual purchases Bitcoin at ?10 lakh and sells it for ?20 lakh, the ?10 lakh profit will be subject to capital gains tax — either short-term or long-term, depending on the holding period. 
• By treating VDAs as capital assets, the government ensures that transactions are subject to standard asset taxation principles, preventing their misuse as unregulated financial instruments.
• Continuing the precedent set in 2022, the bill imposes a 30% tax on income from VDA transfers.
• Unlike traditional capital assets, no deductions (other than the cost of acquisition) are allowed. This means that expenses related to mining, transaction fees, platform commissions, and gas fees cannot be deducted when calculating taxable income. For instance, if an investor buys Ethereum for ?5 lakh and sells it for ?7 lakh, the ?2 lakh profit is taxed at a flat 30% — with no relief for transaction costs. 
• Another crucial provision is the inclusion of VDAs in undisclosed income taxation and asset seizure regulations. If an individual fails to report VDA holdings in their tax filings, they can be classified as undisclosed income and taxed accordingly. 
• Furthermore, Bill allows tax authorities to seize VDAs during investigations or tax raids, similar to how cash, gold, or real estate is confiscated in cases of tax evasion.
• As per the bill, any entity dealing in crypto assets — including exchanges, wallet providers, and even individual traders — is required to report transactions in a prescribed format.

Source: The Hindu