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CA Final · Direct Tax Laws & International Taxation · Taxation of Digital Transactions

During a search on Aarav Traders Pvt Ltd, the officers find a crypto wallet holding virtual digital assets bought out of money that was never disclosed to the Department. The wallet is not reflected in the company's books. Under the Income-tax Act, 2025 provisions on the block assessment, how should the wallet be treated?

The wallet is undisclosed income. The Act's definition expressly lists virtual digital assets alongside money, bullion and jewellery, where they represent income or property that was not or would not have been disclosed. Neither a books entry nor conversion to cash is needed.

  1. AIt is outside undisclosed income because only money, bullion and jewellery are listed
  2. BIt forms part of undisclosed income, since the definition expressly includes virtual digital assets representing income or property not disclosedCorrect
  3. CIt is undisclosed income only if it is also entered in the books of account
  4. DIt is undisclosed income only if converted into money before the search ends

Explanation

The definition of undisclosed income expressly includes money, bullion, jewellery, virtual digital asset or other valuable article that wholly or partly represents income or property not disclosed. Recording in the books or conversion into cash is not required. The option limiting it to money, bullion and jewellery ignores the express reference to virtual digital assets.

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