UPSC Prelims Practice Questions — Budget an opportunity to fine-tune crypto policy, say industry players

Q1. Under which provision of the Income-tax Act, 1961 is the term 'Virtual Digital Asset' (VDA) statutorily defined?

  • A. Section 2(14)
  • B. Section 2(22)
  • C. Section 2(47)
  • D. Section 2(47A)

Q2. In 2025, to how many offshore Virtual Digital Assets Service Providers (VDA SPs) did the Financial Intelligence Unit-India (FIU-IND) issue notices for non-compliance under Section 13 of the Prevention of Money Laundering Act, 2002?

  • A. 9
  • B. 15
  • C. 25
  • D. 50

Q3. With reference to India's anti-money-laundering framework, which one of the following best describes a 'Virtual Digital Asset Service Provider' (VDA SP)?

  • A. A reporting entity under the PMLA, 2002 that exchanges VDAs for fiat currency, transfers VDAs or provides safekeeping/administration of VDAs, and must register with FIU-IND regardless of physical presence in India
  • B. A non-banking financial company licensed by the Reserve Bank of India to deal exclusively in central bank digital currency (CBDC)
  • C. A SEBI-registered intermediary that issues exchange-traded crypto derivatives to Indian residents
  • D. A self-regulatory organisation of crypto miners recognised by the Ministry of Electronics and Information Technology

Q4. Consider the following statements regarding the Indian tax framework for Virtual Digital Assets (VDAs): 1. Income from the transfer of a VDA is taxable at a flat rate of 30% under Section 115BBH of the Income-tax Act, 1961. 2. Tax at source (TDS) at the rate of 1% on the consideration for transfer of a VDA is deducted under Section 194S of the Income-tax Act, 1961. 3. Losses arising from the transfer of one VDA may be set off against gains from the transfer of another VDA. 4. While computing income from transfer of a VDA, deduction for expenditure other than the cost of acquisition is allowed. Which of the statements given above is/are NOT correct?

  1. Income from the transfer of a VDA is taxable at a flat rate of 30% under Section 115BBH of the Income-tax Act, 1961.
  2. Tax at source (TDS) at the rate of 1% on the consideration for transfer of a VDA is deducted under Section 194S of the Income-tax Act, 1961.
  3. Losses arising from the transfer of one VDA may be set off against gains from the transfer of another VDA.
  4. While computing income from transfer of a VDA, deduction for expenditure other than the cost of acquisition is allowed.
  • A. 1 and 2 only
  • B. 3 and 4 only
  • C. 2, 3 and 4
  • D. 1, 3 and 4

Q5. The Financial Intelligence Unit-India (FIU-IND), which regulates Virtual Digital Asset Service Providers under the PMLA, 2002, functions under which one of the following?

  • A. Department of Revenue, Ministry of Finance
  • B. Department of Economic Affairs, Ministry of Finance
  • C. Reserve Bank of India
  • D. Ministry of Electronics and Information Technology
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