Finance Bill 2025 introduces new provisions under Section 285BAA of the Income-tax Act, mandating the furnishing of information about crypto-asset transactions. The bill requires reporting entities to submit transaction details within a specified period and in the prescribed format. If a submitted statement is deemed defective, the tax authority can notify the reporting entity to rectify it within 30 days. Failure to comply will be treated as submitting inaccurate information. If inaccuracies are found later, entities must inform the tax authority and provide correct information within a prescribed time. The Central Government will set rules for the registration of reporting entities, the type of information required, and the due diligence for identifying crypto-asset users. Additionally, the definition of virtual digital assets will be expanded to include any crypto-asset, covering digital representations of value using cryptographically secured distributed ledgers. These changes will be effective from April 1, 2026.
Budget 2025: Obligation to furnish information in respect of crypto-asset
Vide Finance Act 2022, taxation of virtual digital assets (VDA) has been introduced in the Income-tax Act, 1961 (‘the Act’), under section 115BBH of the Act in which the transfer of VDA is to be taxed at the rate of 30% with no deduction in respect of expenditure (other than cost of acquisition) to be allowed. To define VDA, Clause (47A) was inserted in section 2 of the Act. Further, to capture VDA transaction details, section 194S has been inserted in the Act to provide for deduction of tax on payment for transfer of VDA at the rate of 1% of transaction value including cases where the transaction occurs in kind or partly in cash.
2. It is now proposed to insert section 285BAA in the Act, being the Obligation to furnish information of crypto-asset, wherein –
(I) Sub-section (1) of section 285BAA of the Act states any person, being a reporting entity, as may be prescribed, in respect of crypto asset, shall furnish information in respect of a transaction in such crypto asset in a statement, for such period, within such time, in such form and manner and to such income-tax authority, as may be prescribed;
(II) Sub-section (2) of said section states that where prescribed income-tax authority considers that the statement furnished is defective, he may intimate the defect to the person who has furnished such statement and give him an opportunity of rectifying the defect within a period of thirty days from the date of such intimation or such further period as may be allowed, and if the defect is not rectified within the aforesaid period allowed, the provisions of this Act shall apply as if such person had furnished inaccurate information in the statement;
(III) Sub-section (3) of said section states that where a person who is required to furnish a statement has not furnished the same within the specified time, the prescribed income-tax authority may serve upon such person a notice requiring him to furnish such statement within a given time period and he shall furnish the statement within the time specified in the notice;
(IV) Sub-section (4) of said section states that if any person, having furnished a statement, or in pursuance of a notice issued, comes to know or discovers any inaccuracy in the information provided in the statement, he shall within a given period inform the income-tax authority, the inaccuracy in such statement and furnish the correct information in such manner as prescribed;
(V) Sub-section (5) of said section states that the Central Government may, by rules specify the persons to be registered with the prescribed income-tax authority, the nature of information and the manner in which such information shall be maintained by the persons and the due diligence to be carried out by such persons for the purpose of identification of any crypto-asset user or owner;
3. It is also proposed to amend clause (47A) of section 2 to insert sub-clause (d) which states that the definition of virtual digital asset also includes any crypto-asset being a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions, whether or not already included in the definition of virtual digital asset or not.
4. These amendments will take effect from the 1st day of April, 2026.
[Clauses 3 & 85]
Extract of Relevant Clauses of Finance Bill, 2025
Clause 3 of the Bill seeks to amend section 2 of the Income-tax Act relating to definitions.
Clause (14) of the said section provides in sub-clause (b) that “capital asset”, means any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992. Further, sub-clause (c) of the said clause, provides that capital asset means any unit linked insurance policy to which exemption under clause (10D) of section 10 does not apply on account of the applicability of the fourth and fifth provisos thereof.
It is proposed to amend sub-clause (b) of the said clause so as to insert the expression “or held by an investment fund specified in clause (a) of Explanation 1 to section 115UB” after the words “Foreign Institutional Investor”.
It is further proposed to amend sub-clause (c) of clause (14) of the said section so as to make it applicable for unit linked insurance policy to which exemption under clause (10D) of section 10 does not apply.
These amendments will take effect from 1st April, 2026 and will, accordingly, apply in relation to the assessment year 2026-2027 and subsequent assessment years.
Clause (22) of the said section provides the definition of dividend. Sub-clause (e) of the said clause, inter alia, provides that any payment by a company, not being a company in which the public are substantially interested, of any sum, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent. of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits.
It is proposed to insert a new sub-clause (iia) in the said clause so as to provide that dividend does not include––
(iia) any advance or loan between two group entities, where,––
(A) one of the group entity is a “Finance company” or a “Finance unit”; and
(B) the parent entity or principal entity of such group is listed on stock exchange in a country or territory outside India other than the country or territory outside India as may be specified by the Board in this behalf;
It is further proposed to define the expressions “Finance company” or a “Finance unit”, and “group entity”, “parent entity” and “principal entity” in the Explanation to the said clause.
These amendments will take effect from 1st April, 2025.
It is also proposed to amend the clause (47A) of the said section to provide that the definition of virtual digital asset includes any crypto-asset being a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions, whether or not already included in the definition of virtual digital asset.
This amendment will take effect from 1st April, 2026.
Clause 3 of the Bill seeks to amend section 2 of the Income-tax Act relating to definitions. It, inter alia, seeks to amend clause (22) of the said section. It is proposed to insert the Explanation of ‘group entity’, ‘principal entity’ and ‘parent entity’ in Explanation 3, in clause (d) of the said Explanation. It seeks to empower the Board to make rules regarding the conditions which the said entities are required to satisfy.
Clause 85 of the Bill seeks to insert new section 285BAA in the Income-tax Act relating to obligation to furnish information on transaction of crypto-asset.
Sub-section (1) of the said section seeks to provide that any person, being a reporting entity, as prescribed, in respect of crypto asset, shall furnish information in respect of a transaction of such crypto-asset in a statement, for such period, within such time, in such form and manner and to such income-tax authority, as prescribed.
Sub-section (2) thereof seeks to provide that where the prescribed income-tax authority considers that the statement furnished under sub-section (1) is defective, he may intimate the defect to the person who has furnished such statement and give him an opportunity of rectifying the defect within thirty days from the date of such intimation or such further period as may be allowed, and if the defect is not rectified within the said period allowed, the provisions of this Act shall apply as if such person had furnished inaccurate information in the statement.
Sub-section (3) thereof seeks to provide that where a person who is required to furnish a statement has not furnished the same within the specified time, the prescribed income-tax authority may serve upon such person a notice requiring him to furnish such statement within a given time and he shall furnish the statement within the time specified in the notice;
Sub-section (4) thereof seeks to provide that if any person, having furnished a statement, or in pursuance of a notice issued, comes to know or discovers any inaccuracy in the information provided in the statement, he shall within ten days inform the income-tax authority, the inaccuracy in such statement and furnish the correct information in such manner as specified by rules;
Sub-section (5) thereof seeks to provide that the Central Government may, by rules specify the persons to be registered with the prescribed income-tax authority, the nature of information and the manner in which such information shall be maintained by the persons and the due diligence to be carried out by the persons referred to in sub-section (1) for the purpose of identification of any crypto-asset user or owner.
It is also proposed to provide that for the purposes of the said section, crypto-asset shall have the meaning assigned to it in sub-clause (d) of clause (47A) of section 2.
This amendment will take effect from 1st April, 2026.
Extract of Relevant Amendment Proposed by Finance Bill, 2025
3. Amendment of section 2.
In section 2 of the Income-tax Act,–– Amendment of section 2.
(a) in clause (14), with effect from the 1st April, 2026,–
(i) in sub-clause (b), after the words “Foreign Institutional Investor”, the words, brackets, letters and figures “or held by an investment fund specified in clause (a) of Explanation 1 to section 115UB” shall be inserted;
(ii) in sub-clause (c), the words “on account of the applicability of the fourth and fifth provisos thereof” shall be omitted;
(b) in clause (22),––
(i) in the long line, after sub-clause (ii), the following sub-clause shall be inserted, namely:––
‘(iia) any advance or loan between two group entities, where,––
(A) one of the group entity is a “Finance company” or a “Finance unit”; and
(B) the parent entity or principal entity of such group is listed on stock exchange in a country or territory outside India other than the country or territory outside India as may be specified by the Board in this behalf;’;
(ii) in Explanation 3, after clause (b), the following clauses shall be inserted, namely:––
‘(c) “Finance Company” and “Finance Unit” shall have the same meaning as assigned respectively to them in clauses (e) and (f) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Finance Company) Regulations, 2021 made under the International Financial Services Centres Authority Act, 2019:
Provided that such Finance Company or Finance Unit, is set up as a global or regional corporate treasury centre for undertaking treasury activities or treasury services as per the relevant regulations made by the International Financial Services Centres Authority established under section 4 of the said Act;
(d) “group entity”, “parent entity” and “principal entity” shall be such entities which satisfy such conditions as prescribed in this behalf.’;
(c) in clause (47A), after sub-clause (c) and before the proviso, the following sub-clause shall be inserted with effect from the 1st April, 2026, namely:––
“(d) any crypto-asset being a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions, whether or not such asset is included in sub-clause (a) or sub-clause (b) or sub-clause (c):”.
85. Insertion of new section 285BAA.
After section 285BA of the Income-tax Act, the following section shall be inserted with effect from the 1st April, 2026, namely:––
‘285BAA. (1) Any person, being a reporting entity, as prescribed, in respect of a crypto-asset, shall furnish information in respect of a transaction of such crypto-asset in a statement, for such period, within such time, in such form and manner and to such income-tax authority, as prescribed.
(2) Where the prescribed income-tax authority considers that the statement furnished under sub-section (1) is defective, he may intimate the defect to the person who has furnished such statement and give him an opportunity of rectifying the defect within thirty days from the date of such intimation or such further period as may be allowed, and if the defect is not rectified within such period, the provisions of this Act shall apply as if such person had furnished inaccurate information in the statement.
(3) Where a person who is required to furnish a statement under sub-section (1) has not furnished the same within the specified time, the prescribed income-tax authority may serve upon such person a notice requiring him to furnish such statement within a period not exceeding thirty days from the date of service of such notice and he shall furnish the statement within the time specified in the notice.
(4) If any person, having furnished a statement under sub-section (1), or in pursuance of a notice issued under subsection (3), comes to know or discovers any inaccuracy in the information provided in the statement, he shall within ten days inform the prescribed income-tax authority, the inaccuracy in such statement and furnish the correct information in such manner as prescribed.
(5) The Central Government may, by rules prescribe—
(a) the persons referred to in sub-section (1) to be registered with the prescribed income-tax authority;
(b) the nature of information and the manner in which such information shall be maintained by the persons referred to in clause (a); and
(c) the due diligence to be carried out by the persons referred to in sub-section (1) for the purpose of identification of any crypto-asset user or owner.
(6) In this section, “crypto-asset” shall have the meaning assigned to it in sub-clause (d) of clause (47A) of section 2.’.
