Income Tax Act, 2025: Expanded scope of “Virtual Digital Space” to inclde Crypto Records

On 21st August 2025, Indian Government notified The Income-Tax Act, 2025 (hereinafter the "Act"). The Act largely retains existing rate structures while streamlining language and removing redundancies.

A notable procedural update empowers authorities, during search and seizure, to gain access to “Virtual Digital Space” defined broadly to include email servers, social media accounts, online investment and trading accounts, and websites storing asset-ownership details. For crypto and web3 businesses, the near-term takeaway is continuity of the direct-tax architecture with clarified powers around digital data access.

The government has framed the re-introduction as an exercise in simplification rather than a shift in tax burdens. Once rules and circulars follow, exchanges and fintechs should review evidentiary and record-keeping practices for digital assets, since the “Virtual Digital Space” provision squarely places cloud-hosted and online account data within the ambit of tax searches. Expect follow-on administrative guidance as departments implement the new text.

Scope of term “Virtual Digital Assets” has been broadened to cover any asset that holds value in digital form and operates using cryptographic ledger systems such as cryptocurrencies or similar technologies.