The government has introduced stricter compliance requirements for crypto transactions by proposing Section 285BAA in the Income-tax Act, making it mandatory for specified entities to furnish transaction details. The changes, announced as part of the Finance Act 2022, will take effect from April 1, 2026.
Under the new provisions, reporting entities will be required to submit statements on crypto transactions in a prescribed format and timeframe. If a submitted statement is found defective, the entity will have 30 days to rectify it, failing which it will be considered as furnishing inaccurate information. Authorities may also issue notices to entities that fail to submit the required statements. Additionally, any inaccuracies discovered later must be corrected and reported within a specified period.
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The amendments also expand the definition of virtual digital assets (VDA) under Section 2(47A) to include any crypto asset that relies on cryptographically secured distributed ledger technology. This ensures that all forms of digital assets, even those not explicitly covered earlier, fall under the tax framework.The government had previously introduced taxation on VDAs under Section 115BBH, imposing a 30% tax on gains from crypto transfers without allowing deductions for expenses other than the acquisition cost. Section 194S also mandates a 1% tax deducted at source (TDS) on crypto transactions.
With the new reporting obligations, the government aims to enhance transparency, strengthen compliance, and tighten oversight of digital asset transactions.
