Income Tax Bill 2025 Clarifies Virtual Digital Asset Definition, Includes NFTs: Key Details

India’s New Income Tax Bill 2025: Virtual Digital Assets (VDAs) Now Defined

On February 13, Finance Minister Nirmala Sitharaman introduced the new Income Tax Bill, 2025 to the Lok Sabha, shedding light on how the government plans to regulate the emerging sector of Virtual Digital Assets (VDAs). This update brings much-needed clarity for businesses and individuals involved in the Web3 industry, which includes cryptocurrencies, non-fungible tokens (NFTs), and blockchain technologies.

Defining Virtual Digital Assets (VDAs)

The new bill offers an official definition for VDAs, which encompasses any information, code, number, or token generated through cryptographic methods and representing an inherent value. This marks a significant step in recognizing and addressing digital assets in India. For the first time, NFTs, unique blockchain-based tokens that can represent both digital and physical assets, are explicitly classified as VDAs.

NFTs, while primarily used as digital collectibles, have gained financial significance in recent years. Many brands and gaming companies have adopted NFTs for marketing strategies and in-game rewards. Under this new bill, NFT holders are now acknowledged as possessing verified ownership of their assets, which cannot be replicated unless they decide to transfer or divide them.

However, the bill allows the government to exclude certain digital assets from the VDA classification by issuing a notification. This gives room for flexibility as the industry continues to evolve.

Impact on the Crypto Sector

The Income Tax Bill, 2025 is a step toward further integrating cryptocurrency and blockchain into the mainstream financial system in India. Arjun Vijay, founder of Giottus, a leading crypto exchange, expressed optimism about the government’s approach. Vijay believes that once the necessary due diligence is complete, the government will become more supportive of the crypto sector. He also anticipates that, much like stock transactions, crypto transactions will soon be tracked and reported in a similar fashion through the income tax system.

New Reporting Obligations for Crypto Transactions

The 622-page bill includes provisions to regulate crypto businesses more effectively. It specifies that any profits generated through VDAs will be classified as “undisclosed income.” Furthermore, businesses involved in crypto transactions must submit detailed reports to income tax authorities, though the exact format and timeline for submission have not been clarified. Any inaccuracies in the information provided can lead to penalties, but businesses will have 30 days to correct any errors once identified.

The bill stresses the importance of transparency and accountability in the crypto sector, encouraging businesses to proactively report any mistakes to tax authorities.

What About Crypto Taxation?

Despite this newfound clarity, the Income Tax Bill does not introduce any changes to the existing 30% tax on crypto income, which has been in place since 2022. While this may leave some members of the crypto community hoping for a more favorable tax structure, the government seems committed to maintaining the current tax policy for now.

India’s crypto and Web3 communities are closely watching for further developments. As regulations continue to take shape, many hope that the government will eventually adopt policies that foster the growth of the sector, while keeping risks in check.

The Road Ahead

While India is still working to fully understand and regulate the Web3 industry, the new bill signals a promising step toward mainstream adoption of virtual assets. As more crypto businesses align with the new guidelines, authorities will likely take further steps to streamline and support the sector’s growth.

As crypto experts like Utkarsh Tiwari, Chief Strategy Officer at KoinBX, point out, creating comprehensive policies that involve multiple stakeholders will take time. However, the cautious yet structured approach may ultimately lead to a thriving Web3 ecosystem in India.

What are your thoughts on India’s new tax regulations for digital assets? Do you think the government is moving in the right direction, or should more be done to support the Web3 sector? Share your views in the comments below.