Taxing The Future: Cryptocurrencies, Tokenised Assets & Central Bank Digital Currencies Under The Income Tax Act, 2025
- IJLLR Journal
- Oct 13
- 1 min read
Arka Bhattacharya, Advocate
ABSTRACT
As India prepares to usher in the Income Tax Act, 2025 (ITA 2025), the fiscal architecture surrounding digital assets undergoes a transformative recalibration. This article offers a rigorous, forward-looking analysis of how cryptocurrencies, tokenised securities, and Central Bank Digital Currencies (CBDCs) are classified, valued, and taxed under the new regime. Departing from the fragmented and often ambiguous provisions of the Income Tax Act, 1961, ITA 2025 introduces a unified “Tax Year” system, streamlined compliance protocols, and explicit definitions for Virtual Digital Assets (VDAs), thereby aligning domestic law with global best practices.
Through comparative tables, statutory interpretation, and practical illustrations, the article elucidates the treatment of VDAs across heads of income, the nuances of TDS/TCS applicability, and the valuation methodologies tailored for illiquid and tokenised instruments. It further explores the integration of anti-money laundering (AML) obligations under PMLA 2002 with tax reporting mandates, highlighting the emergence of a closed-loop compliance ecosystem. Special attention is devoted to the CBDC framework, which—while excluded from VDA classification—raises novel questions around traceability, cash-equivalent treatment, and auditability.
The article also navigates the complexities of cross-border digital asset transactions, treaty interpretation under DTAAs, and the challenges posed by decentralised exchanges and Web3 protocols. In sum, this work serves as a comprehensive guide for legal practitioners, policymakers, and market participants seeking clarity in an era where fiscal sovereignty must contend with technological decentralisation.
