The notice says my client dealt in a 'virtual digital asset'. What actually falls inside that definition, and are vouchers, reward points and NFTs inside it?
Section 2(47A), inserted by the Finance Act 2022 with effect from 1 April 2022, defined a virtual digital asset in three limbs for AY 2023-24 to AY 2025-26 — a fourth sub-clause (d) has since been added, which this entry does NOT set out because it could not be read (see the editor note) — (a) any information, code, number or token, not being Indian or foreign currency, generated through cryptographic means or otherwise, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functioning as a store of value or a unit of account, and capable of being transferred, stored or traded electronically; (b) a non-fungible token or any other token of similar nature; and (c) any other digital asset the Central Government notifies. A proviso lets the Central Government notify EXCLUSIONS from the definition, subject to conditions, and the Explanation makes 'non-fungible token' itself mean only such digital asset as the Government notifies, and imports the FEMA meanings of 'currency', 'foreign currency' and 'Indian currency'.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2022-04-01, reported as Income-tax Act 1961, s.2(47A); inserted by the Finance Act 2022 (Act No. 6 of 2022), w.e.f. 1-4-2022. It bears on section 2(47A), section 115BBH, section 194S, section 285BAA of the Income Tax Act 1961, in Crypto & Virtual Digital Assets and How Tax Law Is Read matters.
This clause is the gate for the whole regime: if a thing is not a virtual digital asset under s.2(47A), neither s.115BBH nor s.194S can touch it. Four features repay attention. First, limb (a) is drafted very wide — 'by whatever name called', 'generated through cryptographic means OR OTHERWISE', 'exchanged with or without consideration' — so it does not depend on blockchain technology and does not depend on the asset having been bought. Second, the carve-out for Indian and foreign currency is by reference to FEMA, which is why a central bank digital currency issued as Indian currency sits outside. Third, limb (b) on its face catches non-fungible tokens, but the Explanation then narrows 'non-fungible token' to what the Government notifies, so the NFT limb is only as wide as the notification made under it — an officer who asserts that a token is a VDA 'because it is an NFT' has to point to that notification. Fourth, the proviso is the source of the exclusion notifications for things such as gift cards, vouchers, mileage and reward points and web subscriptions; the library holds those notifications as a separate entry. Do not treat this clause as static: section 285BAA(6), inserted by the Finance Act 2025 with effect from 1 April 2026, defines 'crypto-asset' by reference to 'sub-clause (d) of clause (47A) of section 2', which shows that a fourth sub-clause has been added to this definition — see the editor note, because I could not read sub-clause (d) itself on this pass.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Not a case. The clause is a definition in section 2 and governs every use of the expression 'virtual digital asset' in the Act, including the charge in s.115BBH and the withholding obligation in s.194S.
'Virtual digital asset' means (a) any information or code or number or token, not being Indian currency or foreign currency, generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functioning as a store of value or a unit of account including its use in any financial transaction or investment but not limited to investment scheme, and which can be transferred, stored or traded electronically; (b) a non-fungible token or any other token of similar nature, by whatever name called; and (c) any other digital asset that the Central Government may specify by notification. The proviso empowers the Central Government to exclude any digital asset from the definition by notification, subject to such conditions as may be specified. The Explanation provides that 'non-fungible token' means such digital asset as the Central Government may specify by notification, and that 'currency', 'foreign currency' and 'Indian currency' bear the meanings given in clauses (h), (m) and (q) of section 2 of the Foreign Exchange Management Act 1999.
Not a judicial route. The clause is built as a wide general limb plus two limbs that depend on executive notification, with a further notification power to cut things out. That architecture is deliberate: the technology was expected to move faster than the statute, so Parliament wrote limb (a) in functional rather than technological terms — a digital representation of value that can be transferred, stored or traded electronically — and left the Government to add particular assets under limb (c) and to remove particular assets under the proviso. The same technique explains the Explanation: rather than define 'non-fungible token' in the Act, limb (b) is left to be filled by notification, so that the boundary between a collectible token and a token that merely evidences ownership of an underlying physical asset could be drawn administratively. The exclusion of Indian and foreign currency by reference to FEMA rather than by a definition of its own keeps the clause aligned with exchange control and keeps sovereign digital currency outside it.
(47A) "virtual digital asset" means— (a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically;
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Handle my notice → Ask a CA on WhatsAppSection 2(47A), inserted by the Finance Act 2022 with effect from 1 April 2022, defined a virtual digital asset in three limbs for AY 2023-24 to AY 2025-26 — a fourth sub-clause (d) has since been added, which this entry does NOT set out because it could not be read (see the editor note) — (a) any information, code, number or token, not being Indian or foreign currency, generated through cryptographic means or otherwise, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functioning as a store of value or a unit of account, and capable of being transferred, stored or traded electronically; (b) a non-fungible token or any other token of similar nature; and (c) any other digital asset the Central Government notifies. A proviso lets the Central Government notify EXCLUSIONS from the definition, subject to conditions, and the Explanation makes 'non-fungible token' itself mean only such digital asset as the Government notifies, and imports the FEMA meanings of 'currency', 'foreign currency' and 'Indian currency'. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 2(47A), section 115BBH, section 194S, section 285BAA of the Income Tax Act 1961. It is reported as Income-tax Act 1961, s.2(47A); inserted by the Finance Act 2022 (Act No. 6 of 2022), w.e.f. 1-4-2022. This clause is the gate for the whole regime: if a thing is not a virtual digital asset under s.2(47A), neither s.115BBH nor s.194S can touch it. Four features repay attention. First, limb (a) is drafted very wide — 'by whatever name called', 'generated through cryptographic means OR OTHERWISE', 'exchanged with or without consideration' — so it does not depend on blockchain technology and does not depend on the asset having been bought. Second, the carve-out for Indian and foreign currency is by reference to FEMA, which is why a central bank digital currency issued as Indian currency sits outside. Third, limb (b) on its face catches non-fungible tokens, but the Explanation then narrows 'non-fungible token' to what the Government notifies, so the NFT limb is only as wide as the notification made under it — an officer who asserts that a token is a VDA 'because it is an NFT' has to point to that notification. Fourth, the proviso is the source of the exclusion notifications for things such as gift cards, vouchers, mileage and reward points and web subscriptions; the library holds those notifications as a separate entry. Do not treat this clause as static: section 285BAA(6), inserted by the Finance Act 2025 with effect from 1 April 2026, defines 'crypto-asset' by reference to 'sub-clause (d) of clause (47A) of section 2', which shows that a fourth sub-clause has been added to this definition — see the editor note, because I could not read sub-clause (d) itself on this pass. If it applies to you, the first step is this: Before arguing about rate, ask whether the thing is a virtual digital asset at all: the charge in s.115BBH and the deduction in s.194S both depend on it.
Not a case. The clause is a definition in section 2 and governs every use of the expression 'virtual digital asset' in the Act, including the charge in s.115BBH and the withholding obligation in s.194S. The matter was decided on 2022-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. 'Virtual digital asset' means (a) any information or code or number or token, not being Indian currency or foreign currency, generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functioning as a store of value or a unit of account including its use in any financial transaction or investment but not limited to investment scheme, and which can be transferred, stored or traded electronically; (b) a non-fungible token or any other token of similar nature, by whatever name called; and (c) any other digital asset that the Central Government may specify by notification. The proviso empowers the Central Government to exclude any digital asset from the definition by notification, subject to such conditions as may be specified. The Explanation provides that 'non-fungible token' means such digital asset as the Central Government may specify by notification, and that 'currency', 'foreign currency' and 'Indian currency' bear the meanings given in clauses (h), (m) and (q) of section 2 of the Foreign Exchange Management Act 1999.
Not a judicial route. The clause is built as a wide general limb plus two limbs that depend on executive notification, with a further notification power to cut things out. That architecture is deliberate: the technology was expected to move faster than the statute, so Parliament wrote limb (a) in functional rather than technological terms — a digital representation of value that can be transferred, stored or traded electronically — and left the Government to add particular assets under limb (c) and to remove particular assets under the proviso. The same technique explains the Explanation: rather than define 'non-fungible token' in the Act, limb (b) is left to be filled by notification, so that the boundary between a collectible token and a token that merely evidences ownership of an underlying physical asset could be drawn administratively. The exclusion of Indian and foreign currency by reference to FEMA rather than by a definition of its own keeps the clause aligned with exchange control and keeps sovereign digital currency outside it. In the words reproduced by the source cited on this page: "(47A) "virtual digital asset" means— (a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically;"
It was decided by the CBDT Circulars & Instructions on 2022-04-01 and is reported as Income-tax Act 1961, s.2(47A); inserted by the Finance Act 2022 (Act No. 6 of 2022), w.e.f. 1-4-2022. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 2(47A), section 115BBH, section 194S, section 285BAA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. 'Virtual digital asset' means (a) any information or code or number or token, not being Indian currency or foreign currency, generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functioning as a store of value or a unit of account including its use in any financial transaction or investment but not limited to investment scheme, and which can be transferred, stored or traded electronically; (b) a non-fungible token or any other token of similar nature, by whatever name called; and (c) any other digital asset that the Central Government may specify by notification. The proviso empowers the Central Government to exclude any digital asset from the definition by notification, subject to such conditions as may be specified. The Explanation provides that 'non-fungible token' means such digital asset as the Central Government may specify by notification, and that 'currency', 'foreign currency' and 'Indian currency' bear the meanings given in clauses (h), (m) and (q) of section 2 of the Foreign Exchange Management Act 1999. It arises in Crypto & Virtual Digital Assets and How Tax Law Is Read matters, on section 2(47A), section 115BBH, section 194S, section 285BAA of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Take limb (a) apart element by element on the facts — is it information, code, number or token; is it excluded as Indian or foreign currency under FEMA; does it represent value; can it be transferred, stored or traded electronically? If the department relies on limb (b), make it identify the notification issued under Explanation (a), because 'non-fungible token' means only what the Central Government has notified. If the department relies on limb (c), make it identify the notification specifying that digital asset; without one, limb (c) is empty. Check the exclusion notifications issued under the proviso before conceding that a voucher, gift card, loyalty or mileage point or subscription is a VDA, and check the conditions attached to the exclusion. For any year from AY 2026-27 onwards, check the current text of clause (47A) for sub-clause (d) and for the 'crypto-asset' definition that s.285BAA(6) draws from it, because the reporting regime turns on it. Do not read this definition off an indiankanoon bare-act page; take it from the Department's own section page for the year concerned, or from a judgment that reproduces it.
Validity check could not be completed. Validity check could not be completed. The text set out here is confirmed identical across the Department's Year-2022, Year-2024 (No. 1) and Year-2024 (No. 2) pages for s.2, so it is the text for AY 2023-24 to AY 2025-26. I could not read the Year-2025 page for s.2, which truncated at clause (22) on every attempt, and I could not therefore confirm the current text or read sub-clause (d), whose existence is established only indirectly by the cross-reference in s.285BAA(6). A later pass must locate a readable current source for clause (47A) — the Department's Year-2025 or later s.2 page if it can be fetched in parts, or the Finance Act 2025 itself, or a judgment reproducing the amended clause. Until then nothing in this entry should be relied on for AY 2026-27 or later. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Statutory entry. 'tier' is 'cbdt' because the library's tier vocabulary has no value for a statutory entry. 'decided_on' is the date the clause takes effect, 1 April 2022, not a date of decision; that date is read from the footnote on the Department's Year-2022 page for s.2, which prints 'Ins. by the Act No. 6 of 2022, w.e.f. 1-4-2022' against clause (47A). A REAL GAP, stated plainly: the text set out here is the text as it stands on the Department's Year-2022, Year-2024 (No. 1) and Year-2024 (No. 2) pages for s.2, which are word for word identical. I could NOT read the Year-2025 version of the s.2 page: it is a very long page and every fetch of it truncated at clause (22), so the two answers I received saying clause (47A) was 'absent' from it are artefacts of truncation and are NOT evidence that the clause has been changed or removed. I therefore state sub-clauses (a), (b) and (c), the proviso and the Explanation as the text governing AY 2023-24 to AY 2025-26, and I do NOT set out sub-clause (d). That sub-clause exists: the Department's page for s.285BAA (Year stamp 2025) prints sub-section (6) as 'In this section, "crypto-asset" shall have the meaning assigned to it in sub-clause (d) of clause (47A) of section 2', and that section was inserted by the Finance Act 2025 with effect from 1 April 2026. I did not read sub-clause (d)'s words or its commencement footnote, and nothing here should be relied on for it. I also did NOT re-read the CBDT exclusion notifications or the NFT notification on this pass and have deliberately stated no notification number or date; the library holds them as separate entries. Verified independently on this pass: a fetch of the Year-2025 s.2 page that expressly forbade an 'absent' answer returned 'NOT REACHED — my view of the page ends at clause (22)', which confirms the truncation and confirms that the earlier 'absent' answers were artefacts. Two further routes were tried and failed: /w/section-2-68 is a Year-2019 (No. 1) page, and the indiankanoon bare-act page for section 2 of the 1961 Act at /doc/545792/ still prints only sub-clauses (a), (b) and (c) with no sub-clause (d) — a fresh instance of the rule that indiankanoon act pages must never be used to state a statutory position. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
'Virtual digital asset' means (a) any information or code or number or token, not being Indian currency or foreign currency, generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functioning as a store of value or a unit of account including its use in any financial transaction or investment but not limited to investment scheme, and which can be transferred, stored or traded electronically; (b) a non-fungible token or any other token of similar nature, by whatever name called; and (c) any other digital asset that the Central Government may specify by notification. The proviso empowers the Central Government to exclude any digital asset from the definition by notification, subject to such conditions as may be specified. The Explanation provides that 'non-fungible token' means such digital asset as the Central Government may specify by notification, and that 'currency', 'foreign currency' and 'Indian currency' bear the meanings given in clauses (h), (m) and (q) of section 2 of the Foreign Exchange Management Act 1999.
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I borrowed money to buy crypto. Can I deduct the interest against my 115BBH income?
I sold Bitcoin in FY 2020-21, before the VDA regime — capital gains or income from other sources?
I trade crypto on an exchange. Who deducts the 1% under s.194S, on what amount, and what changes if a broker is in the chain?
I bought crypto directly from the seller, no exchange — do I deduct? And what if I paid in crypto rather than cash?