The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman, has disappointed India’s cryptocurrency sector by maintaining stringent tax policies and introducing additional compliance requirements. Hopes for tax relief or regulatory clarity were dashed as the budget retained the 30% tax on crypto gains and 1% TDS on transactions, creating liquidity challenges and discouraging retail participation.

Additionally, the budget proposed amendments to the Income-tax Act, 1961, requiring investors to disclose transaction details under a newly introduced Section 285BAA. The government has also classified virtual digital assets (VDAs) as undisclosed income, subjecting unreported gains to a 60% tax along with a 50% penalty on the tax amount. This move aligns crypto earnings with gambling and horse racing income, reinforcing strict oversight.

The finance minister further expanded the definition of VDAs under Section 2(47A) to cover all crypto-assets relying on cryptographic security and distributed ledger technology. These changes, set to take effect from April 1, 2026, aim to tighten compliance and prevent tax evasion within the digital asset space.

Industry experts voiced concerns over the lack of incentives for Web3 startups and the continued taxation policies that hinder innovation. Sathvik Vishwanath, CEO of Unocoin, stated that the unchanged tax regime discourages investor participation and stifles sectoral growth. Meanwhile, CA Sonu Jain of 9Point Capital emphasized the importance of correctly reporting crypto gains to avoid severe penalties.

The government’s strict stance on cryptocurrencies follows its broader strategy of enhancing financial transparency. Two years ago, India placed the sector under anti-money laundering regulations, further tightening scrutiny over digital assets. With no relief in sight, crypto investors must brace for increased compliance and hefty penalties on undisclosed earnings.