In a strategic move to curb illegal activities linked to cryptocurrencies, Indian Finance Minister Nirmala Sitharaman, in her 2025 Budget speech on February 1, proposed the inclusion of “virtual digital assets” (VDAs) in the definition of undisclosed income. This decision highlights the government’s efforts to tighten oversight in an area increasingly seen as prone to unregulated transactions.
The proposal seeks to expand the existing framework for undisclosed income. The document states, “It is proposed to add the term ‘virtual digital asset’ to the said definition of undisclosed income of the block period.” Further, the government intends to set a deadline for the completion of block assessments within twelve months from the end of the quarter in which the last authorizations for search or requisition were executed.
This new proposal follows two years after India imposed money laundering provisions on the cryptocurrency sector. The Finance Ministry had earlier applied anti-money laundering (AML) legislation to crypto trading, safekeeping, and related financial services. In addition, India has imposed stringent tax rules on cryptocurrencies, including a levy on crypto trading, reinforcing its commitment to regulating this growing industry.
Mr. Edul Patel, CEO and Co-founder of Mudrex, provided his insights on the Budget’s impact on the cryptocurrency sector.
“The Union Budget 2025 has maintained the existing tax structure on VDAs. While regulatory clarity remains, the lack of revisions—particularly on the 1% TDS and the inability to offset losses—continues to pose challenges for investors, traders, and the industry,” Patel said.
He went on to highlight a key concern: the high tax burden on cryptocurrency traders. Despite India being a leader in grassroots crypto adoption, many investors have turned to offshore exchanges to escape India’s heavy taxation, leading to a decline in transparency and a reduction in domestic market growth. Patel suggests that a more balanced approach, such as lowering the TDS to 0.01% and allowing loss offsets, would encourage sustainable participation and innovation.
“As digital assets and regulations continue to evolve globally, it is crucial for India to strike the right balance between regulation and growth,” Patel concluded. “As the country works on the discussion paper for crypto policy, the industry is looking towards constructive policy discussions that can position India as a leader in the Web3 economy, driving both economic growth and technological progress, rather than an observer.”
