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Budget Blow: Crypto traders may face 60% tax penalty for undisclosed income under the new proposed IT Act Provisions

Crypto assets have been proposed to be included under Section 158B of the Income Tax Act, effective retrospectively from February 1, 2025. This will bring VDAs on par with other undisclosed income assets such as money, bullion, jewellery.

Union Budget 2025 has proposed to introduce crypto under Section 158B of the Income Tax Act that reports ‘undisclosed income’, and it’s more than what meets the eye.

This section will give the power to government agencies to conduct block assessment or investigation of undisclosed crypto income of traders, which if found not reported will amount to as high as 60 percent income tax fine for the entire period of the unreported crypto income, as mentioned under 158BA(7) referring to ‘Tax in the case of block assessment of search cases.’

This will be retrospectively applicable from February 1, 2025.

Meyyapan Nagappan, Partner, Tax and Impact Finance, Trilegal told Moneycontrol, “Virtual digital assets have been brought within the ambit of undisclosed income for the purposes of block assessment. Block assessment is a set of special procedures to tax undisclosed income relating to multiple years by the government agencies.”

“Pursuant to this change the risk for retail investors or traders of crypto for not having disclosed crypto income increases significantly. The tax rate is much higher under the block assessment process if undisclosed income is discovered. This is likely intended to incentivise traders and investors to transact through regulated exchanges that also undertake tax withholding,” he added.

Source: moneycontrol.com

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