Budget 2025's crypto changes, now live: section 285BAA and the wider VDA definition

Section 285BAA is the provision added by the Finance Act 2025 that requires prescribed reporting entities, such as crypto exchanges, to furnish information on crypto-asset transactions to the tax department. It took effect on 1 April 2026, along with two other crypto changes from Budget 2025: a wider definition of a virtual digital asset, and the inclusion of VDAs in undisclosed income for block assessments after a search.

What Budget 2025 did not change matters just as much. The flat 30% tax on VDA gains stayed. The 1% TDS stayed. Securities transaction tax was not extended to crypto futures and options. In short, the government chose more visibility, not new rates. If you hold Bitcoin, nothing about how much tax you pay changed. What changed is how much the department can see.

What Budget 2025 did

The Union Budget presented in February 2025 carried three changes for virtual digital assets, all effective from 1 April 2026:

1. A new reporting obligation, section 285BAA, for prescribed entities dealing in crypto-assets.
2. A wider definition of VDA in section 2(47A), to include crypto-assets that use cryptographic security and distributed ledger technology.
3. VDAs added to undisclosed income in block assessments, which apply after a search and seizure.

The 1 April 2026 date is also the date the Income-tax Act, 2025 came into force, replacing the 1961 Act and renumbering many sections. The crypto rules carry over in substance, but section numbers may differ in current documents. Check numbering with your CA.

Section 285BAA: platforms report

Under section 285BAA, prescribed reporting entities, which include crypto exchanges and similar businesses, must furnish information about crypto-asset transactions. The detail of what they report and when sits in rules and guidance.

That detail arrived in late July 2026. CBDT issued guidance, reported on 27 July 2026, under section 509 of the Income-tax Act, 2025 and Rules 241 to 244 of the Income-tax Rules, 2026. These implement the OECD's Crypto-Asset Reporting Framework, known as CARF. KPMG summarised the guidance on 7 August 2026.

The main points, as reported:

• It applies to transactions from calendar year 2026.
• Reporting crypto-asset service providers file Form 167, due by 31 May of the following year.
• Exchanges must confirm users' tax residency.
• They report acquisitions, disposals, crypto-to-crypto trades and transfers, in rupees.
• Transfers to external wallets that are not identified are reported in aggregate.
• Wallet addresses must be kept for at least seven years.

For you as a user, the guidance creates no new tax and no new filing duty. It does not decide whether crypto is legal. But it does mean the department will have transaction-level data from platforms, so what you put in your return should match what they report.

The wider VDA definition

Section 2(47A) defines what counts as a virtual digital asset. The Finance Act 2022 inserted it, together with section 115BBH (the 30% tax) and section 194S (the 1% TDS).

Budget 2025 widened it to include "crypto-assets that utilize cryptographic security and distributed ledger technology". The practical effect is to make the definition harder to argue around. If something is built on a blockchain and secured by cryptography, the safe assumption is that the VDA rules apply to it.

Bitcoin was always a VDA under the original definition. The change matters more for newer tokens and structures that someone might have argued fell outside it.

Undisclosed income and searches

When the tax department carries out a search and seizure, it can make a block assessment covering undisclosed income for past years. Budget 2025 added VDAs to what counts as undisclosed income in those assessments.

I have seen this change described with specific section numbers and penalty rates in various places. The source I rely on gives no section number, so I am not going to quote one. One CA quoted in coverage suggested unreported crypto gains found in a search could face very high combined tax and penalty. That is a practitioner's view, not the text of the law. The point is simpler: unreported crypto is now explicitly within reach of the strongest tool the department has.

The department is also already acting on what it finds. Coverage of FIU-IND's annual report for 2024-25 noted that tax authorities had identified about ₹888.82 crore of undisclosed VDA income.

How this connects to FIU-IND

Section 285BAA is a tax reporting rule. It sits alongside a separate set of rules under the Prevention of Money Laundering Act. Since 7 March 2023, businesses that exchange, transfer or safeguard VDAs for others are reporting entities and must register with FIU-IND, verify customers, keep records and report suspicious transactions to FIU-IND. One stream of data goes to the tax department, the other to the financial intelligence unit. Unocoin is registered with FIU-IND as a reporting entity under the PMLA.

What did not change

For an ordinary holder, this is the part to remember:

• The 30% tax: income from transferring a VDA is still taxed at a flat 30% under section 115BBH, plus surcharge and 4% cess. Only the cost of acquisition is deductible.
• Losses: still cannot be set off against other income or carried forward. A loss on one coin cannot reduce tax on a gain from another.
• The 1% TDS: still applies under section 194S, now covered by section 393 of the Income-tax Act, 2025, with the same ₹10,000 and ₹50,000 yearly thresholds.
• Crypto F&O: STT was not extended to crypto futures and options. Their tax treatment remains unsettled. If you trade them, talk to a CA.

What this means at filing time

In practice, Budget 2025 changes three habits for anyone who files a return with crypto in it.

Check your AIS before you file. As platforms report more, your Annual Information Statement is more likely to show crypto transactions. Compare it with your own records and your exchange statements. If something does not match, sort it out with the platform or your CA before filing.

Report everything in Schedule VDA. Every sale, swap and spend, including losses and small amounts, in ITR-2 or ITR-3. For each: date acquired, date transferred, head of income, cost, sale value and income. Enter the TDS so it is credited.

Keep your own records for years. Platforms must keep wallet addresses for at least seven years under the new reporting guidance. Your records should last at least as long as theirs. If you move coins to your own wallet, your exchange history stops at the withdrawal, so keep the transaction IDs with your purchase statements.

Visibility over new rates

When we started Unocoin in 2013, the tax department visited our office on our third day of business. I remember thinking even then that this would be a long relationship, and that the only workable approach was to deal with it openly. You can't run from the government.

Budget 2025 is that relationship maturing. The government did not raise rates or invent new taxes. It made sure it can see. For anyone who has been reporting every sale in Schedule VDA, nothing changes. For anyone who has been hoping small sales slip through, the window is closing, and it is better to correct course with a CA now than to explain it later.

Every rule in this post, with worked examples, is in our India crypto tax guide. When you file, our Schedule VDA guide walks you through each field. General information, not tax advice.

Keep reading

Sources

• Business Today, how Budget 2025 changed VDA taxation
• Inc42, CBDT's CARF guidance (27 July 2026)
• KPMG, India guidance on CARF implementation (7 Aug 2026)
• Patron Accounting, Income-tax Act 2025 effective date
• Taxguru, scheme of taxation of VDAs
• TDSMAN, TDS on VDAs under section 393(1)
• Cyril Amarchand, FIU-IND annual report 2024-25 takeaways