Tax dept puts out guidance note on crypto asset reporting aligned with OECD framework: What this means

Through the OECD reporting framework, tax authorities will have access to more reliable information on crypto transactions, including those involving offshore exchanges. The likelihood of data-driven verification is expected to increase, experts said.

How are crypto assets defined legally?

India’s income tax legislation defines a “crypto-asset” as a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions. The OECD Crypto-Asset Reporting Framework (CARF) defines crypto-assets similarly, but also includes “similar technology to validate and secure transactions, which includes cryptocurrencies, as well as cryptography- based tokens”.

The CBDT, however, pointed out that nothing in the guidance note and FAQs should be construed as affecting the permissibility or legitimacy of the transactions in crypto-assets as well as regulation for transactions in crypto-assets.

What does the guidance note say?

India currently engages in the Automatic Exchange of Information (AEOI) with tax authorities in other jurisdictions through global tax transparency initiatives such as the Common Reporting Standard (CRS) and the Foreign Account Tax Compliance Act (FATCA). Building on these frameworks, the OECD has developed the CARF to extend global tax transparency standards to crypto-asset activities.3

The 198-page note seeks to guide Reporting Crypto-Asset Service Providers (RCASPs) for compliance with the reporting obligations under section 509 of the Income-tax Act, 2025, and under Rules 241 to 244 and Form 167 of the Income-tax Rules, 2026.

In the note, CBDT Chairman Ravi Agrawal highlighted the fresh challenge posed by the rapid growth of crypto-assets amidst India’s steadfast commitment to combating tax evasion and protecting its revenue base. The note will help RCASPs understand and discharge their obligations under the Income-tax Act and Income-tax Rules in clear and practical fashion, he said.

What are the implications for taxpayers and crypto exchanges?

The note provides practical guidance to RCASPs on their obligations under the Income-tax Act and Rules, with detailed FAQs addressing the key facets of implementation, including scope, due diligence, reportable users, reporting requirements, filing process and penalties.

“It clarifies that, in case of any inconsistency between the Guidance Note or the FAQs and the Act or Rules, the statutory position in the Act and Rules shall prevail. Its practical explanations, illustrations and FAQs should help Reporting Crypto-Asset Service Providers understand and implement the statutory framework,” Richa Sawhney, Partner – Tax, Grant Thornton Bharat, told The Indian Express.

The framework differentiates between new and existing users. “For new users, due diligence and valid self-certification are required at onboarding. For pre-existing users as of December 31, 2025, equivalent due diligence must be completed within 12 months from January 1, 2026. This gives service providers a practical transition window,” Sawhney said.

According to Amit Agarwal, Senior Partner, Nangia & Co LLP, a misconception about this Guidance Note is that every crypto investor is now required to make fresh disclosures directly to the Income-tax Department. “That is not what the Guidance Note provides. Instead, the primary compliance obligation has been placed on RCASPs, who are now required to collect, verify and report specified information relating to crypto transactions,” he said.

Crypto exchanges or service providers will be required to undertake customer due diligence and determine the tax residency of users; collect prescribed KYC and taxpayer information; maintain records of reportable crypto transactions; and furnish annual transaction information in the prescribed manner under Form 167, he said.

“Taxpayers should continue reporting crypto income in accordance with the existing provisions of the Income-tax Act; maintain proper records of purchases, sales, transfers and wallet movements; preserve exchange statements and supporting documentation; and ensure that the information disclosed in their income-tax return is consistent with the records available with crypto exchanges,” Agarwal added.

What is the OECD’s reporting framework?

The CARF requires the RCASPs, which are the service providers collecting and reporting information on transactions of crypto-assets, to identify their users and to report on specified transactions, with a view to ensuring the annualised reporting of tax-relevant information concerning certain activities in relation to crypto-assets.

Once received by tax authorities, the information will be automatically exchanged with the tax authorities of the jurisdiction(s) of residence of the crypto-asset users, pursuant to an international agreement that provides a legal basis for the automatic exchange of such information for tax purposes, the note added.

Why was the reporting framework developed?

The increasing use of crypto-assets raised concerns among tax administrations worldwide about potential tax compliance evasion. Since assets can be transferred and held outside the traditional financial sector, they could go undetected and unreported by CRS, thus reducing the efficacy of the automatic exchange of information mechanism. Thus, a global reporting framework was seen as necessary to plug this loophole.

Work was initiated by the G20 and OECD jurisdictions, by the Working Party No.10 of the Committee on Fiscal Affairs of the OECD, which includes G20 and other non-OECD jurisdictions and which deals with Exchange of Information standards and their compliance. This led to the creation of the Crypto-Asset Reporting Framework (CARF) Group by the Global Forum with more than 50 countries, including India, as members.

In April 2021, the G20 Finance Ministers and Central Bank Governors discussed taking forward work in this area. The work on developing CARF was concluded in 2022, received the OECD’s approval in August 2022, and was then endorsed by the G20 Bali Leaders’ Declaration in November 2022. India’s G20 Presidency in 2023 further endorsed the process by asking the Global Forum to decide on a coordinated timeline, with most members in favour of 2027 as the year of rollout.