India Expands Global Tax Reporting to Cover Crypto and Digital Assets

One of the biggest attractions of cryptocurrencies has always been privacy. Investors could move digital assets across borders within minutes, often without the same level of reporting required for traditional bank accounts. While blockchain transactions are publicly recorded, identifying the real owner behind a wallet has not always been easy.

That is now changing.

Governments across the world are working together to improve tax transparency in the digital asset market. India has also joined this effort by bringing specified crypto-assets and certain digital financial products under its international tax reporting framework. The latest move does not introduce a fresh tax. Instead, it strengthens reporting requirements, making it easier for authorities to track cross-border crypto transactions.

क्रिप्टोकरन्सी म्हणजे काय?

A cryptocurrency is a digital asset that uses cryptography to secure transactions. Unlike the Indian Rupee or the US Dollar, it is not issued by a central bank. Instead, it operates on blockchain technology, which is a shared digital ledger maintained by a network of computers.

Bitcoin, launched in 2009, was the first cryptocurrency. Since then, thousands of digital tokens have entered the market. Ethereum, Solana and XRP are among the better-known names.

People use cryptocurrencies for different reasons. Some see them as long-term investment assets, while others use them for cross-border payments or decentralised financial services. Transactions can often be completed quickly and without the involvement of traditional financial institutions.

These features have made cryptocurrencies popular. However, they have also raised concerns around money laundering, tax evasion and the movement of funds across jurisdictions.

Why has regulating crypto been difficult?

Unlike money held in a bank account, crypto assets can be stored in private digital wallets. Investors can also use exchanges located outside their home country, making it difficult for tax authorities to identify ownership and monitor transactions.
For example, an Indian resident may purchase Bitcoin through an overseas exchange and later transfer it to a private wallet. Without a common reporting system, tracking such transactions becomes much harder.

To address this challenge, the Organisation for Economic Co-operation and Development (OECD), at the request of the G20, introduced the Crypto-Asset Reporting Framework (CARF). The framework allows participating countries to automatically exchange information on crypto transactions, much like they already do for traditional financial accounts.

What has changed in India?

India has updated its tax reporting rules to include specified crypto-assets, certain digital money products and other relevant digital financial assets.

The reporting requirements were first introduced under Section 285BAA of the Finance Act, 2025. Following the implementation of the Income-tax Act, 2025, these provisions have been re-codified under Section 509(1).

The Central Board of Direct Taxes (CBDT) also amended Rules 114F, 114G and 114H on March 5, 2026. As a result, specified crypto-assets are now recognised as reportable financial assets under India's international reporting framework.

The revised rules operate alongside existing global standards such as the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA), strengthening the exchange of tax information between participating countries.

Who will be affected?

The changes apply to banks, custodians, insurance companies, mutual funds and businesses involved in crypto transactions.
The framework introduces the concept of Reporting Crypto-Asset Service Providers (RCASPs). These generally include crypto exchanges, brokers, wallet providers and payment processors.

Popular Indian platforms such as CoinDCX, Mudrex and other eligible service providers may need to strengthen their compliance systems if they fall within the reporting requirements.

The rules also affect investors. Those using these platforms may have to provide additional details while opening accounts or updating their KYC records. These include their full name, residential address, country of tax residence, Tax Identification Number (TIN), which is PAN in India, along with their date and place of birth.

Enhanced due diligence will apply to accounts with balances exceeding $1 million. Such accounts will undergo additional verification before they are classified for reporting.

Which transactions will be reported?

The reporting framework goes beyond simply identifying account holders. It also captures different types of crypto transactions.

These include selling cryptocurrencies for traditional currencies such as the Indian Rupee, exchanging one cryptocurrency for another and transferring crypto assets from an exchange to a private or unhosted wallet.

Suppose an investor swaps Bitcoin for Ethereum instead of selling it for cash. That transaction can also fall within the reporting framework, even though no fiat currency changes hands.

Similarly, if digital assets are transferred from an exchange to a private hardware wallet, those transfers may also become reportable under the new framework.

However, Central Bank Digital Currencies (CBDCs), including India's e₹, are treated differently. They are already covered under existing banking reporting standards and therefore remain outside the scope of CARF.

Does this change the way crypto is taxed?

No. India's existing tax rules remain unchanged.

Income from Virtual Digital Assets continues to be taxed at a flat rate of 30%. A 1% Tax Deducted at Source (TDS) also applies to eligible crypto transactions.

For instance, if an investor purchases Bitcoin for ₹5 lakh and later sells it for ₹8 lakh, the ₹3 lakh profit remains taxable under the existing rules.

CARF simply makes compliance stronger. Even if an investor uses an overseas exchange located in a participating country, transaction information can be shared with Indian tax authorities through international reporting arrangements.

An easy way to understand CARF is to compare it with an airport X-ray scanner. It does not introduce new baggage rules. It simply makes it much harder to hide prohibited items. Likewise, CARF does not create a new tax. It helps authorities identify crypto transactions more effectively.

Important timelines and penalties

India has already started implementing different phases of the reporting framework.

• Specified crypto-assets became recognised as reportable financial assets from January 1, 2026.
• The CBDT notified amendments to the Income-tax Rules on March 5, 2026.
• Domestic reporting under Section 509 began from April 1, 2026.
• Reporting entities must submit their first international CARF reports for the 2026 calendar year by May 31, 2027.
• The Income-tax Act, 2025 also prescribes penalties for non-compliance. Under Section 446, reporting entities may face a penalty of ₹200 for each day of delay in filing required statements. A separate penalty of ₹50,000 may apply if inaccurate information is furnished and not corrected within the prescribed time.

निष्कर्ष

The latest framework shows India's broader effort to align its crypto regulations with international standards.

For investors, the biggest takeaway is that transparency will increase. Holding digital assets is not prohibited, but failing to disclose taxable transactions may become more difficult. Crypto exchanges and financial institutions will also need to invest in stronger compliance systems, better customer verification and improved reporting processes.