Unexplained Assets: Old Section 69A Is Now Section 104, And Crypto Is Now Explicitly Covered

Section 69A has always been the section that catches unaccounted cash, gold, and jewellery sitting outside the books. The new Act keeps that core purpose intact, but makes two changes that matter a great deal in 2026: it widens who counts as the owner of an asset, and it explicitly brings virtual digital assets into scope for the first time.

Old law: Section 69A, Income Tax Act, 1961, titled Unexplained Money, etc.

New law: Section 104, Income Tax Act, 2025, effective 1 April 2026, applicable from AY 2026-27

What the Section Says

Section 69A (old) and Section 104 (new) applies where an assessee is found to be the owner of money, bullion, jewellery, or any other valuable article during a financial year, and that asset is not recorded in the books of account maintained for any source of income. If the assessee offers no explanation, or an unsatisfactory one, about the nature and source of acquiring that asset, the assessing officer can treat its value as deemed income for that year.

Like the unexplained credit and investment provisions, this carries the same consequence: taxation at the flat rate under the applicable rate section, an effective 78 percent after surcharge and cess, with no deduction, exemption, or loss set off permitted against the addition.

What Actually Changed

This is not a plain renumbering. Two real substantive shifts came with the move to Section 104.

First, ownership language widened. Old Section 69A used the phrase owned by the assessee, which courts historically read as requiring legal or recorded ownership in the assessee's name. Section 104 changes this to owned by or belonging to the assessee, a deliberate broadening that lets the tax department look past legal title and examine who actually controls or benefits from an asset, even if it is not formally in that person's name. This closes a gap that allowed assets to be parked under a relative's or associate's name while the real beneficiary remained untouched.

Second, virtual digital assets are now explicitly listed. Cryptocurrency, non-fungible tokens, and other virtual digital assets are named in Section 104 alongside money, bullion, and jewellery. Under the old Section 69A, the department had to argue that crypto holdings qualified as a valuable article, an interpretational stretch that created genuine litigation risk. Section 104 removes that ambiguity entirely.

To summarize:

• Section number: 69A becomes 104
• Ownership test: owned by widens to owned by or belonging to, covering beneficial ownership and control, not just legal title
• Asset coverage: money, bullion, jewellery, and other valuable articles now explicitly include virtual digital assets
• Tax consequence: unchanged, effective 78 percent flat rate, no deductions permitted
• Old Sections 69, 69B, and 69C, dealing with unrecorded investments, understated investments, and unexplained expenditure, remain distinct sections nearby, now Sections 103 and 105

Worked Example

Old position, Section 69A, applicable up to AY 2025-26:

During a search action in FY 2025-26, the department discovers Mr. Kapoor holds cryptocurrency worth Rs. 30,00,000 in a wallet, along with gold jewellery worth Rs. 8,00,000 kept at his residence, neither of which appears in any books of account or is explained by any disclosed source of income. The department seeks to bring the crypto holdings to tax under Section 69A, but since crypto is not explicitly named in the section, arguing that it qualifies as a valuable article invites a technical challenge from the assessee's counsel.

Result: The jewellery of Rs. 8,00,000 is added without difficulty, since it fits squarely within the old section's language. The crypto addition of Rs. 30,00,000 proceeds too, but rests on a broader interpretation of valuable article, leaving room for the assessee to contest the characterization itself, separate from the source explanation.

New position, Section 104, applicable from AY 2026-27:

Same facts, same discovery, occurring in FY 2026-27. Both the jewellery of Rs. 8,00,000 and the crypto holdings of Rs. 30,00,000 are added under Section 104 without any interpretational gap, since virtual digital assets are now named explicitly in the section. The combined addition of Rs. 38,00,000 is taxed at the effective 78 percent rate, and Mr. Kapoor has no technical ground to dispute whether crypto falls within the section's scope, only whether the source explanation offered is satisfactory.

Why This Matters for Filing

• Clients holding cryptocurrency or other virtual digital assets need to treat source documentation with the same seriousness as cash or jewellery. Exchange statements, purchase records, and bank trails funding crypto purchases should be retained and be ready to produce.
• The owned by or belonging to language means assets parked in a spouse's, relative's, or associate's name no longer offer the same protection they may have provided under the old ownership test, if the real beneficiary and control can be traced back to the assessee.
• Any client review involving search or survey proceedings should now specifically check for virtual digital asset holdings as a standard part of the unexplained asset inquiry, not as an afterthought.
• This section continues to interact with the Schedule VDA reporting requirements already in place for crypto transactions, so any mismatch between disclosed VDA transactions and actual holdings is now doubly exposed, both under VDA-specific reporting rules and under Section 104 itself.

Bottom Line

Section 69A has become Section 104, and unlike most renumbered clubbing and unexplained income sections, this one genuinely expanded in scope. The ownership test now reaches beneficial owners, not just those holding legal title, and virtual digital assets are named outright instead of being argued in through interpretation. For any client with unexplained wealth sitting in crypto or in someone else's name, the room to maneuver just got smaller.