The new provision in the upcoming Income Tax Bill will classify cryptocurrencies and other unreported digital assets as “undisclosed income” during searches by tax authorities. According to a moneycontrol report, If these assets are found in tax raids, they could be treated as undeclared income, potentially leading to penalties. This move aims to increase scrutiny of hidden assets and transactions, ensuring transparency and accountability in financial dealings.

The new tax bill classifies “undisclosed income” as any unreported assets or transactions, such as money, bullion, jewelry, or virtual assets like cryptocurrency. The inclusion of cryptocurrency in the new tax bill comes alongside traditional assets like gold and bullion.

This addition means that, just like physical assets, digital currencies will be considered as “undisclosed income” if not properly declared during tax searches. It also covers income linked to unrecorded entries or transactions, whether fully or partially unreported. This provision aims to target hidden wealth and ensure transparency in financial dealings.

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Virtual Digital Asset

A virtual digital asset refers to any information, code, number, or token that is not a currency (either Indian or foreign), generated through cryptographic means or otherwise. It can be transferred, stored, or traded electronically, making it a form of digital value that operates independently of traditional currencies. This includes various digital assets like cryptocurrencies and other virtual tokens.

‘Undisclosed Income’

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.

Moneycontrol report says that the new tax bill includes expense, exemption, deduction or allowance claimed under the Act and found to be incorrect. 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 retains the existing 30% tax on income from cryptocurrency and virtual assets, with no deductions or exemptions. Additionally, the one percent Tax Deducted at Source (TDS) on digital asset transfers remains in effect.