Introduction
The newly introduced Income Tax Bill,2025 (IT bill), presents a transparent and clear legal framework classifying Virtual Digital Assets (VDA), including cryptocurrencies and Non-Fungible Tokens (NFTs), as an entity for the first time. India rapidly emerges as the global leader in adopting Virtual Digital Assets (VDA), including cryptocurrencies and NFTs. To embrace the full potential of VDA, India is in dire need of a futuristic and balanced regulatory framework. The advent of such a framework would support invention and ensure compliance with tax regulations, which will help in building India’s Position as a leader in the digital asset revolution. With the massive expansion of the digital economy and blockchain technology, the regulation and governance of Virtual Digital Assets becomes of paramount importance. Many countries around the globe, like the U.K., the U.S, and Singapore, have set a global precedent which is followed by other major economies of the world, including India. This newly formed bill introduces a comprehensive legal framework for VDAs. Various digital assets, including cryptocurrencies, NFTs and other digital assets, are enshrined under section 2(111) of the IT Bill. Introduction of this bill will reduce financial fraud and risk and prevent the practice of tax evasion as practised by many companies in India. This bill will also help ensure clarity and financial transparency within this system, providing oversight to the government. India can build a secure and inclusive digital asset ecosystem with a transparent and balanced financial system.
Key changes and amendments
The Income-Tax Bill 2025 was introduced by Finance Minister Nirmala Sitharaman in Lok Sabha on February 13, 2025. A departmental committee was also formed under the chairmanship of Baijayant Panda to analyse and examine the IT Bill. This committee was formed to restructure four major shortcomings discovered by the government. i.e simplifying language, reducing scepticism and compliance burden. During the presentation of the Union Budget 2025, the finance minister tabled the Income Tax Bill 2025. ITB 2025 is proposed to be brought into effect from 1 April 2026. It has been introduced to replace the archaic Income Tax Act of 1961 and to formulate the regulation of Virtual Digital Assets (VDAs). The main intention of the government in bringing this Bill was to simplify the archaic language of the existing act and remove the provisions which are of no use. There are some notable changes introduced through this bill, like the number of sections has been reduced to 536 from 819, and frequently used words such as “assessment year” and “previous year” have been replaced with “tax year” for transparency and clarity in understanding. Under this newly presented Bill, the exemption limit has been raised considerably. If a person earns up to 12 lakhs, then he is exempt from paying tax. The main aim of the government is to provide relief to the middle-class taxpayers, which will in turn result in the increased adoption of the new tax regime. Under Section 80C, investments like PPF, LIC were available up to Rs.1.5 lakh under the old regime, but in the new regime, the same is not available. The procedure for filing the paperwork was more hectic under the old regime as compared to the new one, where there is minimal paperwork. Taxpayers who face high tax deductions must adopt the old tax regime as compared to the new one, which is more viable for taxpayers with less or no deductions at all. Under this bill, it has been introduced that the standard deduction, which is a type of flat deduction from gross or pension income, will be increased from the previous cap of Rs.50,000 to Rs.75,000, providing relief to the taxpayers. This Bill also introduces provisions for faceless collection and assessment of information. This will ensure that the process is seamless and smooth with less human interference and more efficiency. This Bill also benefits NRIs by providing them with varied currency exchange rates, reducing their tax liability. It is considered a general rule that the income earned outside India is not taxable within India, but on the other hand, all the income earned in India is taxable within India. Under the Income Tax Bill,2025, it has been introduced that NRIs earning more than 15 lakh or more within the lands of India will be considered as residents of India, and tax will be levied on the income generated within India. Various clauses in the Income Tax Bill, 2025 concern NRIs, like Clause 5 defines the scope of income for residents and non-residents, and Clause 174 talks about the prevention of transfer of income to non-residents to avoid tax. This Bill also addresses the concern of growing fraudulent methods practised by taxpayers by disclosing specific details like insurance policy numbers and housing loan information. This Bill has brought a major change by changing the two-term system and introducing a single term called “Tax Year”, which means the year in which a person earns income and the year in which that income will be assessed and taxed will be the same. Through this change, we have tried to follow the global regulatory framework for tax compliance, like the countries of the US and the UK, which have already adopted the method of “one single tax year”.
Virtual digital assets and cryptocurrencies
Around the world digital economy is expanding and reshaping at an unprecedented pace, discovering, classifying and regulating various virtual digital assets (VDAs). Under this Bill, a comprehensive definition of VDAs is defined under Section 2(111). It is defined that “virtual digital asset” means— (a) any information or code or number or token (not being Indian money or foreign money), generated by means of cryptography or otherwise, by any name, giving a digital representation of value exchanged with or without consideration, with the promise or representation of possessing intrinsic value, or serves as a store of value or unit of account including use in any financial transaction or investment, but not restricted to investment scheme; and can be electronically transferred, stored or traded; 24 (b) any non-fungible token or token of similar nature, by whatsoever name called; (c) any other digital asset, as the Central Government may, by notification, prescribe, (d) any crypto-asset being a digital representation of value that is based on a distributed ledger secured through cryptography or a similar technology to secure and validate transactions[1]. By introducing a particular section for legal compliance ensures that India is among the major economies of the world which have introduced an effective and efficient system for the regulation of Virtual Digital Assets IT Bill, 2025, clearly classifies VDAs as property and capital assets under Section 92(5)(f)[2]. Various virtual digital assets, like NFTs, are considered property. Globally, VDAs are classified as securities in the U.S. or property in countries like the U.S, Australia and New Zealand. Classification of VDAs as capital assets is done with the addition of Section 115BBH[3]. Under the Income Tax Act 1961, Virtual Digital Assets are defined under section 2(47)(A)[4]. Under this section, cryptocurrencies and non-fungible tokens were also included. Income from Virtual Digital Assets, including cryptocurrencies and NFTs, is taxed at a rate of 30%, and additionally 4% cess is also imposed. Further, Section 194S of the Income Tax Act,1961 levies 1% TDS (Tax Deducted at Source) if the sale sometimes exceeds Rs.50,000 or Rs.10,000[5]. The main purpose is to tax various crypto traders and investors as and when they carry out their businesses by deducting a certain percentage. Moreover, it is pertinent here to note that TDS is levied only on Indian residents. In 2017, a PIL was filed by Sidhdharth Dalmia and Vijay Pal Dalmia[6] before the Supreme Court seeking a ban on selling and buying these cryptocurrencies in India. In pursuance of growing concerns raised by the people, the government formed a committee in 2017 to address the hardships associated with digital currencies. In 2019, the centre also introduced “The Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019”,[7] which intended to ban crypto-tech activities like buying, selling, dealing etc. This Step taken by the Ministry of Finance is a great initiative to regulate the circulation of VDAs, which in turn will reduce the illicit transactions and will impose liability upon the people using VDAs. In this way, we can ensure that an effective and efficient system is established for the regulation of Virtual Digital Assets in the Indian Financial Forum. With this, India joined various other countries in regulating the transactional process involving Virtual Digital Assets.
What was the need for this Bill in the first place?
The need for this bill was to ease the framework of taxation in India. The archaic language of this Bill was replaced with modern language to make the understanding of legal language easier. The most important aspect of this new bill is that it’s about simplifying the existing laws. This new Bill also provides for reduced exemptions and deductions and offers fewer options for tax saving. The process of filing forms is reduced, and the process is made more streamlined, avoiding confusion. Before the introduction of this bill, there were many legal disputes involving the Income Tax Act, 1961. This Bill also gives a broader definition to VDAs, which will help in the reduction of disputes involving fraud committed using cryptocurrencies, NFTs or any other newly introduced digital assets. By analysing the bill, one can easily figure out that most of the provisions and rules remain unchanged. With the enactment of this Bill from April 2026, tax authorities will critically scrutinise the digital financial transactions. Through this bill, more authority will be granted to various tax authorities to probe the undisclosed financial transactions. When a departmental committee was appointed for the structurization of the Income Tax Act,1961, it was identified that cross-referencing between different sections was urgent. So, in pursuance of this urgency, a simplified way of doing cross-referencing was introduced between various sub-sections and provisions. Some outdated sections and provisions were to be removed, which was considered one of the most important reasons why this Bill was introduced. If we delve deep into the history of Income Tax Laws in India, it is blatantly visible that these laws are dynamic, which means they require regular amendments and changes. These changes must reflect the changing economic, social and political realities of the nation. Other laws, such as criminal and civil laws, do not undergo such frequent amendments and changes, whereas the taxation laws are updated regularly from time to time, reflecting the changes in fiscal policies and government policies. Previously also in the years 2019 and 2009, attempts were made to simplify the language of the IT Act.
Conclusion
The introduction of this bill is a step in the right direction of making the taxation laws in India precise, clear and easy to read and understand. This will help India to join the international countries that have made their taxation laws clear and concise, which can be easily understood by the populace. The existing income tax act was open to various interpretations, creating havoc and confusion among taxpayers. The formulation of this bill provides clarity to the taxpayers, which in turn will help them to make decisions wisely, weighing every pro and con. The removal of the non-obstante clauses from the Income Tax Act, 1961, marks a significant step toward making India’s tax laws more consistent and transparent. However, this is just the beginning—taxation laws must continue to evolve in response to the changing financial landscape. So far, the bill has only been introduced by the finance minister during the Budget presentation. Its real impact will only be understood once it is put into practical effect.
Reference
[1] Finance Bill, 2025, § 2(111), India Code (2025), https://www.indiabudget.gov.in/doc/Finance_Bill.pdf.
[2] Income Tax Bill, 2025, § 92(5)(f), Bill No. __ of 2025 (India)
[3] Income Tax Act, 1961, § 115BBH (India)
[4] Income Tax Act, 1961, § 2(47A) (India)
[5] Income Tax Act, 1961, § 194S (India
[6] Siddharth Dalmia v. Union of India, 2019 SCC OnLine SC 1799
[7] INDIA’S STRUGGLE WITH THE LEGAL REGULATION OF CRYPTO CURRENCY » LegalOnus : https://legalonus.com/indias-struggle-with-the-legal-regulation-of-crypto-currency/.
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Authors: MO SAIF (Fifth-Year Law Student) & DEVESH SHARMA (Second-Year Law Student), Chanakya National Law University