CA Final · Direct Tax Laws & International Taxation · Taxation of Digital Transactions
During a search at the residence of Ms. Kavya Nair, officers find a crypto wallet holding tokens bought five years ago with cash that was never recorded in her books or disclosed in any return. The tokens have not been sold or converted into rupees. For the block period, how are they treated under the Income-tax Act, 2025 definition of undisclosed income?
The tokens are undisclosed income. The definition expressly lists virtual digital assets that represent wholly or partly income or property which has not been or would not have been disclosed. Sale, conversion into rupees or a books entry is not required.
- AThey are undisclosed income only once sold and converted into money
- BThey fall outside undisclosed income because tokens are not tangible valuables
- CThey are undisclosed income only if an entry for them exists in the books of account
- DThey are undisclosed income because the definition expressly includes a virtual digital asset representing income or property not disclosedCorrect
Explanation
The definition of undisclosed income includes money, bullion, jewellery, virtual digital asset or other valuable article that represents wholly or partly income or property not disclosed. No sale or books entry is needed. The tokens were bought from undisclosed cash, so they qualify. Requiring conversion to money adds a condition the text does not contain.
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