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

During a search on Kavita Rao, officers find a wallet holding Ethereum bought from cash sale proceeds never recorded in her books or returns. Treatment of the Ethereum as undisclosed income for the block period is being examined. Which statement is correct under the Income-tax Act, 2025?

The Ethereum is undisclosed income. The definition expressly lists virtual digital assets alongside money, bullion and jewellery, and it covers any such asset representing income or property that has not been or would not have been disclosed. No conversion into rupees is required.

  1. AIt is undisclosed income only after she converts it into rupees
  2. BIt is undisclosed income only if it is shown in her books of account
  3. CIt is outside undisclosed income because the term covers only money, bullion and jewellery
  4. DIt is undisclosed income because the definition expressly includes a virtual digital asset representing income 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. The Ethereum was bought from unrecorded income, so it qualifies without any conversion. The option limiting the term to money, bullion and jewellery ignores the express reference to virtual digital assets.

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