Archives April 2026

The Income Tax Act 2025 has set a clear framework for taxing virtual digital assets in India. This took effect on April 1, 2026. The basis of the prior tax laws is retained, but reporting accuracy and digital compliance are given more weight.

What Counts as a Virtual Digital Asset

The law defines these assets under Section 2(111). A virtual digital asset is any digital token or code created through cryptography that can be traded or stored electronically.

• Crypto Assets: This includes popular coins like Bitcoin and Ethereum.
• NFTs: Digital art and unique collectables fall here.
• Utility Tokens: These are tokens that provide access to specific digital services.

Digital versions of official currencies and gift vouchers are not part of this definition. The law treats these as separate from the VDA tax bracket.

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The Tax Rate and Calculations

These assets are considered capital assets by the government. Holding them for a long time has no advantages. A 30% flat tax is applied to all gains. The minimum tax rate is 31.2% when the 4% health and education cess is included.

Only the asset’s actual purchase price is deductible. All additional expenses are prohibited, including platform fees, gas fees, and mining costs. This implies that you are not responsible for the extra money spent on the transaction when paying tax on the gross profit.

Managing Losses and Transfers

The rules for losses are very strict. You cannot use a loss from one coin to reduce the profit made on another. Also, you cannot use crypto losses to lower your tax on salary or business income. If you end the year with a net loss, you cannot carry it forward to next year. Every transaction stands alone.

Exchanging one digital asset for another also counts as a sale. If you swap Bitcoin for Solana, the tax department views this as selling Bitcoin at its current market value. Gifts are also taxable. If you receive digital assets worth more than 50,000 rupees as a gift, you must report it as income from other sources.

Tax Deducted at Source

A 1 per cent TDS applies to almost all transfers. The buyer or the exchange must take this 1 per cent out and pay it to the government. This rule applies even if the seller is selling at a loss. The limit for this deduction is 10,000 rupees for most people. For individuals with smaller businesses, the limit increases to 50,000 rupees.

Reporting and Penalties

Taxpayers must use Schedule VDA in their tax returns. You have to list every single trade with the date of purchase and the date of sale. Section 446 of the new Act imposes severe fines for mistakes. Failing to report transactions can cost 200 rupees for every day of delay. If you provide wrong information, the penalty is a flat 50,000 rupees.

• Individuals: The deadline for filing is July 31st.
• Audit Cases: Businesses must file by October 31st.

Conclusion

The government clearly wants full transparency of all digital transactions, as stated in the 2025 Act. The actual risk for investors is the new penalty laws for incorrect reporting, even though the 30% tax is high. It is now required, not optional, to maintain complete records of each trade and platform ID. Accurate data and timely filing are essential for success in current tax environment.

The growth of cryptocurrencies, NFTs, and other virtual digital assets (VDAs) has altered India’s financial and investment sector. The government applies a 1% Tax Deducted at Source (TDS) on VDA transfers in order to monitor digital transactions and maintain tax transparency. Sections 393(1) [Table S.No. 8(vi)] and 393(4) [Table S.No. 12] of the Income Tax Act 2025 presently regulates this provision.

Meaning and Purpose of 1% TDS

TDS is a mechanism where tax is collected at the time of a transaction instead of at the end of the year. The 1% TDS on VDAs applies when one person pays another for transferring a digital asset. Whenever money changes hands for such an asset, 1% of the payment is deducted and paid to the government as an advance tax.

The purpose of this rule is to track crypto transactions, ensure traders do not avoid tax, and create a transparent audit trail in a sector often marked by anonymity.

Under the Income Tax Act, 1961

The 1% TDS was originally introduced through Section 194S in the older 1961 Act. It applied to any person making a payment to a resident for the transfer of a VDA. This covered both exchange trades and peer-to-peer transfers. The deduction was required at the time of credit or payment, whichever happened earlier.

Under the New Income Tax Act, 2025

The Income Tax Act, 2025, which is effective for the current tax year, provides a modern legal framework for digital assets. The new Act defines VDAs broadly to include any cryptographically generated representation of value or rights. The government has retained the 1% TDS under Section 393 with refined procedures using Form 141.

Key features under the 2025 Act:

• Unified Framework: VDAs are categorised as capital assets, ensuring consistent tax treatment across all digital tokens.
• Integrated Deduction System: The 1% TDS process is automated through the government portal using Form 141 Schedule D.
• Thresholds: TDS is required if the transaction value exceeds 10,000 rupees. For specified persons (individuals/HUFs with turnover below 1 crore), the threshold is 50,000 rupees.
• Real-time Reporting: Transactions are reported through linked data using Form 141, which acts as both a challan and a statement.
• Penalty Provisions: Section 446 of the new Act imposes strict penalties for failing to deduct or remit TDS on time.

Comparison

Aspect	Income Tax Act, 1961	Income Tax Act, 2025
Legal Provision	Section 194S	Section 393
Scope	Cryptocurrencies and NFTs	All VDAs including stablecoins and crypto-assets
Rate of TDS	1%	1%
Thresholds	10,000 / 50,000 rupees	10,000 / 50,000 rupees
Reporting Form	Form 26QE	Form 141 (Schedule D)
Credit Statement	Form 26AS / AIS	Form 168 (Unified AIS)
Enforcement	Manual Audit-Based	Real-time Digital Monitoring

Practical Effects on Taxpayers

The 1% TDS rule makes it possible for traders and investors to track even small cryptocurrency transactions. It validates digital assets inside the tax framework while also adding a compliance step. At present, exchanges are essential to the automatic deduction and remittance of TDS utilising Form 141. Individual traders’ manual labour is reduced as a result.

However, because the tax is deducted even if the sale is a loss, high-frequency traders can find that the deduction has an impact on their daily liquidity. The 2025 Act’s automation makes it easier to reconcile these deductions while paying taxes.

Conclusion

One important measure for financial transparency in India is the 1% TDS on VDA transactions. The system has developed into a technology-driven procedure under the 2025 Act, particularly Section 393 and Form 141. For both the government and the taxpayer, it offers real-time monitoring and more seamless compliance. Anyone trading in the digital asset market in 2026 must have a thorough understanding of these parts.

The ‘Goods and Services Tax (GST) Return Filing’ is the process of reporting information about your company’s sales, purchases, the taxes you have collected from customers and the taxes you have paid to the government. All registered companies are required to report their activities regularly (periodically, monthly, quarterly, or annually) on the basis of their category, turnover, and type of registration.

You may file returns online via the GST Portal at www.gst.gov.in. This system helps in maintaining accountability and transparency, and it enables you to comply with applicable laws. Additionally, submitting returns will help in collecting accurate input tax credits (ITC) when you make purchases.

Why should you submit your GST returns?

1. Required for all registered GST taxpayers.
2. Helps companies collect ITC for purchases resulting in a lower tax burden.
3. Maintains accurate records for accounting purposes and builds credibility with other stakeholders.
4. Avoids fines, late payment charges and interest linked with delays.
5. Facilitates smooth financial management and audit compliance.

Types of GST Returns

Return Type	Purpose	Filing Frequency	Due Date	Applicable To
GSTR-1	Details of outward supplies (sales)	Monthly / Quarterly (QRMP)	11th of next month (monthly) / 13th of month after quarter (QRMP)	All regular taxpayers
GSTR-1A	Amendment to GSTR-1 for current period	Monthly	Before filing GSTR-3B	Regular taxpayers correcting sales data
GSTR-3B	Summary of sales, ITC, and tax payment	Monthly / Quarterly (QRMP)	20th of next month (monthly); 22nd or 24th depending on state (QRMP)	All regular taxpayers
GSTR-4	Annual return for Composition Scheme	Annually	30th June of following financial year	Composition scheme dealers
GSTR-5	Return for non-resident taxable persons	Monthly	20th of next month	Non-resident taxpayers
GSTR-6	Return for Input Service Distributors (ISD)	Monthly	13th of next month	ISDs (Mandatory registration for common ITC)
GSTR-7	Return for entities deducting TDS	Monthly	10th of next month	TDS deductors under GST
GSTR-8	Return for e-commerce operators collecting TCS	Monthly	10th of next month	E-commerce operators
GSTR-9	Annual return summarising year transactions	Annually	31st December following financial year	Regular taxpayers with turnover > ₹2 crore
GSTR-9C	Self-certified reconciliation statement	Annually	31st December following financial year	Taxpayers with turnover > ₹5 crore
GSTR-10	Final return when registration is cancelled	One-time	Within 3 months of cancellation/order	Cancelled/Surrendered registrations

Key Updates (Effective 2025 and 2026)

• GSTR-3B Locking: From July 2025, it will no longer be possible to make changes to tax liabilities directly within GSTR-3B. Any corrections made to returns can now only be done through editing the corresponding information contained in GSTR-1A.
• IMS (Invoice Management System): IMS is a tool designed for suppliers who receive invoices from their customers. Suppliers are able to have their customers either accept or reject these invoices prior to having the invoice added as an input service credit on the customer’s GSTR-2B.
• Mandatory ISD: As of April 2025, if any registered entity has common inputs to use in more than one registration, this entity must establish an Input Service Distributor using the ISD mechanism (GSTR-6).

Conclusion

Legal compliance requires timely filing of GST returns. Businesses may operate transparently, get input tax credits, and keep records by filing GST. Through the Integrated Management Systems (IMS), your GST return is directly related to suppliers, and as of the 2026 GST amendments, GSTR-1A amendments are closely related to supplier transactions. Fines and interest may be applied to the total amount payable if you fail to file on time.

Section 34 of the Income Tax Act, 2025, is a residuary provision that allows businesses and professionals to claim deductions for all expenses not covered under Sections 28 to 33, provided they are incurred wholly and exclusively for business or profession. It lowers the total tax burden by ensuring that legal business expenses are deducted when calculating taxable income.

Section 34(1): “Any expenditure (not being an expenditure of the nature specified in sections 28 to 33, 44 to 49, 51 and 52 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession, shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession’.”

However, any expense incurred for illegal purposes, prohibited by law, or to settle legal contraventions is strictly prohibited from being claimed as a deduction.

Key Points of Section 34 of the Income Tax Act 2025

Aspect	Explanation
Type of expenditure	Revenue expenditure (not capital or personal).
Purpose	Must be for carrying on a business or profession.
Timing	Expense must be incurred during the relevant Tax Year.
Legality	Expenses related to illegal activities, bribes, compounding fees, or notified settlement payments are disallowed.
Nature	Must not be covered under specific deduction Sections 28 to 33.

Conditions for Allowance under Section 34

For an expense to qualify for a deduction under Section 34, the following conditions must be satisfied:

• It must not be a personal or capital expense.
• It should not be covered under specific Sections 28 to 33 (like rent, depreciation, etc.).
• It must be wholly and exclusively incurred for business or professional purposes.
• It must not relate to illegal or immoral activities, including providing prohibited benefits or perquisites to third parties (such as unethical gifts to doctors).
• The expense should be incurred during the relevant Tax Year.

Expenses Allowed as Deduction under Section 34(1)

Type of Expense	Description / Example
Interest on Business Loans	Interest on loans taken for business operations (not for capital investment).
Legal Fees	Legal services for business contracts, disputes, or compliance.
Advertisement Expenses	Marketing and promotional costs in print, digital, or TV media.
Employee Salaries	Salaries, bonuses, and compensation to employees. (Salary to partners allowed only within limits prescribed).
Loan Raising Expenses	Brokerage, registration, or stamp duty costs for obtaining business loans.
Employee Welfare Expenses	Costs for staff amenities, welfare activities, and festive expenses.
Professional Fees	Fees paid to consultants, accountants, auditors, etc.
Telephone and Communication	Telephone, internet, and courier charges for business use.
Festival/Corporate Events	Expenses for corporate festivals like Diwali, Christmas, etc.
Compensatory Payments	Payments made as compensation (not penalties) in contractual obligations.

Expenses Disallowed under Section 34(1)

Type of Expense	Reason for Disallowance
Fees to ROC for changing AoA/MoA	Capital expenditure alters the company structure.
Expenses for possession of land	Not related to regular business activity.
Fees to increase authorised capital	Capital expenditure enhances the financial base.
Payment for tenancy rights	Capital expenditure provides a long-term right to property.
Fixed Asset Guarantee Commission	Treated as capital expenditure.
Penalty or Fine for violating laws	Not allowed, against public policy.
Settlement/Compounding Fees	Explicitly disallowed under Section 34(3) for notified laws.
Demolition for new construction	Capital expenditure leading to a new asset.
Shifting registered office	Administrative convenience, not directly related to business profits.
CSR Expenses	Not allowed under Section 34 (specifically excluded by Section 34(2)(b)).

Conclusion

Section 34 of the Income Tax Act, 2025, plays an important role in determining which expenses are allowed for deductions. It helps in maintaining transparency and makes sure that only genuine expenses are claimed for deductions. It disallows expenses related to capital formation, personal use, or unlawful purposes. Businesses should maintain proper documentation to ensure maximum benefit under Section 34.