India Budget 2025-26: Crypto VDA Reporting and Tax Changes Accounting Firms Must Act On

Finance Minister Nirmala Sitharaman's Union Budget for 2025-26, presented on 1 February 2025, does more than adjust income tax slabs. Buried beneath the headline personal-tax changes is a statutory redefinition of Virtual Digital Assets that now explicitly captures crypto assets, paired with a mandatory third-party reporting obligation that takes effect from 1 April 2026. For accounting firms, CFOs, and payroll teams managing cross-border assignments into or out of India, the budget creates a tighter compliance window than most organisations have yet acknowledged. Robust crypto accounting software and well-documented digital asset accounting workflows are no longer optional.

The Expanded VDA Definition: Why It Matters for Digital Asset Accounting

Under the existing framework, "Virtual Digital Asset" was already defined in the Income-tax Act, but the Budget proposes to extend that definition to include any crypto asset, described as a digital representation of value that relies on a cryptographically secured distributed ledger, or a comparable technology, to validate and settle transactions.

What the expanded definition captures

The practical effect is that assets which might previously have been argued to sit outside the VDA perimeter on technical grounds now fall squarely within Indian tax law. Tokens built on permissioned chains, wrapped assets, and certain utility tokens all need to be evaluated against this broader language. Firms advising corporate clients or high-net-worth individuals with diverse digital asset portfolios should re-run their classification analysis immediately.

Reporting obligations from April 2026

Alongside the definitional change, the Budget proposes that transactions in crypto assets must be reported to the Income Tax authorities by a prescribed Reporting Entity, effective 1 April 2026. The specific entities required to report, and the format of that reporting, are to be prescribed by rules. What is clear is that this is a third-party information regime, similar in architecture to the existing Statement of Financial Transaction (SFT) framework that already covers securities brokers and banks.

For accounting firms, this creates two immediate tasks: first, identify which of your clients are likely to be designated as Reporting Entities; second, assess whether those clients have the transaction data infrastructure to produce accurate, timely reports. This is precisely where digital asset accounting software becomes operationally critical. Manual spreadsheets will not scale to meet a statutory reporting obligation with tax-authority scrutiny attached.

For broader context on how Indian regulators, including the RBI, have approached digital asset oversight in recent years, see our India RBI and broader Asia crypto regulation context.

Income Tax Slabs and the New Regime: Global Mobility Cost Impact

The Budget retains the optional old tax regime without change. Rates, slabs, surcharge, and cess under that regime are unchanged. The default new tax regime, however, sees material revisions.

Revised slabs and the enhanced rebate threshold

The income threshold at which resident individuals qualify for the full rebate under the new regime rises from INR 700,000 to INR 1,200,000. Income taxable at special rates, including capital gains, is excluded from this calculation. New tax rates and adjusted income slabs apply under the default regime, meaning the effective tax position of an inbound assignee or a locally hired employee can shift materially depending on which regime applies to them.

Payroll and tax-equalisation implications

For global mobility teams and their advisers, two practical consequences follow. Cost projections for future assignments to India, and from India where Indian tax applies, need to be recalculated using the revised slabs. Any existing hypothetical tax calculations used in equalisation programmes may also require adjustment, because the differential between the home-country tax and the revised Indian liability will change. Payroll administrators should not adjust withholding until the Finance Bill receives assent, but preparation should begin now so that changes can be implemented promptly once enacted. The proposed effective date for most provisions is 1 April 2025, or such other dates as may be specified.

TDS Rationalisation and TCS on LRS Remittances

TDS threshold changes

The Budget proposes rationalising certain Tax Deduction at Source rates and raising the threshold limits at which several TDS provisions apply. Accounting teams processing vendor payments, rent, and professional fees will need to map the specific provisions once the Finance Bill text is finalised, but firms should treat this as a workflow change rather than a minor adjustment, particularly where automated payable systems apply TDS rates programmatically.

Liberalised Remittance Scheme and education loans

Two changes to Tax Collected at Source on outward remittances are relevant for corporate treasury and HR teams. The threshold above which TCS applies to remittances under the Liberalised Remittance Scheme rises from INR 700,000 to INR 1,000,000. Separately, remittances made specifically for education purposes, where the funds come from a loan taken from a specified financial institution, are proposed to be fully exempt from TCS. Firms managing education-loan-funded remittances for assignees or sponsored employees should review their current TCS collection procedures against these proposed thresholds.

Updated Return Window Extended to 48 Months

One procedural change with significant compliance planning implications is the proposed extension of the time limit for filing an updated income tax return from 24 months to 48 months from the end of the relevant Assessment Year.

Additional tax cost of late updated returns

The extended window comes with a cost. An updated return filed after the existing 24-month mark but within 36 months attracts additional tax of 60 percent on the aggregate of incremental tax and interest. A return filed between 36 and 48 months attracts 70 percent additional tax on the same base. The proposal applies from Assessment Year 2025-26, which means it is relevant for tax returns as far back as AY 2021-22.

For firms managing clients with unresolved historic crypto transactions, this window matters. An updated return that voluntarily corrects an underreported VDA gain, even if filed late under the extended window, avoids the harsher consequences of a department-initiated reassessment. The cost is real, but it is quantifiable and controllable. Compliance teams should identify any open historic positions now and weigh the updated-return route against the litigation risk of waiting.

It is worth comparing this approach to how other jurisdictions have handled voluntary disclosure for digital assets. Our analysis of how SARS approached crypto tax disclosure obligations in South Africa provides a useful parallel for firms advising multinational clients.

Other Measures Affecting Individual and Employer Tax Positions

Perquisite thresholds and employer obligations

The income threshold used to determine the taxability of employer-provided benefits, including concessional amenities and employer-funded medical treatment abroad, is proposed to be revised upward. The current threshold for concessional benefits stands at INR 50,000 in salary; the threshold for overseas medical treatment reimbursements currently sits at INR 200,000. Revised figures are expected in the enacted Finance Bill. Payroll teams should not reconfigure systems until the final numbers are confirmed.

ULIPs reclassified as capital assets

Unit Linked Insurance Plans for which the existing tax exemption is unavailable will be treated as capital assets equivalent to equity-oriented funds. Gains on redemption will be taxed as capital gains. For HNW clients who hold such ULIPs alongside crypto portfolios, this creates a combined capital-gains exposure that needs to be modelled together, particularly given that the VDA capital-gains rate of 30 percent already applies without the benefit of indexation or loss offset against other income.

NPS Vatsalya and life insurance from IFSC offices

The existing INR 50,000 deduction for National Pension Scheme contributions under the old regime is proposed to extend to contributions made by a parent or guardian to a minor's NPS Vatsalya account. Partial withdrawals of up to 25 percent from that account for specified reasons will not be taxable in the hands of the parent or guardian. Separately, proceeds from life insurance policies issued through intermediary offices in an International Financial Services Centre are proposed to be fully exempt, with no conditions attached. These are relatively contained changes but are relevant for employee benefits consultants advising IFSC-based entities.

Accounting and Crypto Bookkeeping Software Readiness: What Firms Should Do Now

The VDA reporting obligation landing on 1 April 2026 is the most operationally urgent item in this budget for firms serving digital asset clients. The architecture of the obligation places the reporting burden on designated entities, not on individual taxpayers, which means the data flows need to be in place well before the deadline.

System and data readiness

Firms should begin by auditing which clients transact in crypto assets and whether those clients capture complete transaction-level data, including timestamps, counterparty information, and INR-equivalent values at the point of each transaction. This is the foundational data set that any reporting entity will need to produce compliant filings. Crypto bookkeeping software that integrates directly with exchange APIs and on-chain data sources is the most reliable way to maintain this record. Manual processes introduce gaps that become compliance failures under a statutory reporting regime.

Policy and process updates

Beyond systems, firms should update their client onboarding questionnaires to capture VDA holdings under the expanded definition, review any existing tax opinions on assets that previously sat outside the old VDA scope, and flag the updated-return opportunity to clients with historic underreported positions. For global mobility clients, revised cost-projection models should be prepared so that assignment budgets reflect the new slab structure before new assignments are signed off.

Our crypto compliance and reporting pillar sets out the broader framework within which these India-specific obligations sit.

Source: KPMG Global Mobility Services Flash Alert 2025-035

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