The Central Board of Direct Taxes (CBDT) has released a comprehensive guidance note laying out how Indian crypto platforms and foreign exchanges catering to Indian users must report transactions and taxes under the Income-tax Rules, 2026.
The document does not introduce a new tax, but it operationalises reporting obligations under Section 509 of the Income-tax Act, 2025, placing the primary compliance burden on Reporting Crypto-Asset Service Providers (RCASPs) rather than individual investors.
The guidance note also formalises India’s alignment with the Organisation for Economic Co-operation and Development’s Crypto-Asset Reporting Framework (CARF), a global tax transparency standard that involves over 50 participating jurisdictions.
What the Guidance Actually Says
According to the CBDT, the note provides operational clarity to RCASPs for compliance with reporting obligations under Section 509 of the Income-tax Act, 2025, and Rules 241 to 244 read with Form 167 of the Income-tax Rules, 2026. The Board has clarified that the document is not a regulation on the legitimacy or permissibility of crypto transactions themselves, and cited the OECD’s Commentary on CARF as reference material for reporting entities.
Reporting is expected to begin for transactions occurring in calendar year 2026, with the first filings due in 2027. This matches the broader CARF rollout timeline that India has been building toward through successive rule changes over the past year. Exchanges will need to strengthen KYC, tax residency identification, and transaction reporting systems to meet the standard.
This follows the new penalties introduced during the Union Budget in February 2026, where the government set daily fines of Rs 200 for failure to file and Rs 50,000 for inaccurate reporting.
Reporting Burden Shifts to Exchanges, Not Individuals
The most significant clarification in the guidance concerns who is responsible for reporting. Individual crypto users will not be required to report the taxes on their own transactions. The compliance burden falls on their exchanges or service providers.
The guidelines further specify that crypto service providers should not treat a “crypto asset user” as an individual user if the account or benefits accrue to another individual or entity acting as an agent, custodian, nominee, signatory, investment advisor, or intermediary.
In such cases, the individual or entity on whose behalf the crypto asset user relationship is in place should be treated as the actual crypto asset user, and identification must be carried out on that basis.
Reportable Retail Payment Transactions
Another important clarification deals with merchant payments made in crypto. When a crypto service provider transfers payments made in crypto assets from a customer to a merchant for a value greater than $50,000, and acts as an agent for the customer, it must report such transfer as a “Reportable Retail Payment Transaction.”
Where the service provider is acting as an agent of the merchant, the transfer will be reported as such and not as a retail transaction. In this case, the customer of the merchant becomes the crypto asset user whose transaction gets reported for taxation.
The guidance further notes that, with respect to such transfers, the RCASP is also required to treat the merchant’s customer as the Crypto-Asset User and to report the transaction as a Reportable Retail Payment Transaction with respect to that customer.
Cross-Border Ownership and the Hierarchy of Nexus
The guidance also sharpens oversight for cross-border cases. Where multiple crypto service providers of various jurisdictions are involved, or where an RCASP is incorporated in one country and operates in another, the IT Rules have created a “hierarchy of nexus” set of rules, as per the report by Moneycontrol.
According to the note, when there are multiple jurisdictions where a nexus exists that are both partner jurisdictions, the jurisdiction with the strongest link should be considered the primary jurisdiction for reporting purposes. In practical terms, a nexus higher on the list represents a stronger link than one lower on it, ensuring that a single transaction is not double-reported or lost between two overlapping regimes.
Industry Voices and CBDT Position
Ravi Gupta, Chairman, CBDT, said, “India’s commitment to combating tax evasion and protecting its revenue base has remained steadfast. The rapid growth of crypto-assets, however, brought with it a fresh challenge. Assets that can be issued, held and transferred outside the traditional financial system, across national borders, and may escape the reporting obligations applicable to financial institutions under the CRS (Common Reporting Standard) & FATCA (Foreign Account Tax Compliance Act).”
Gupta added that recognising this risk, the G20 mandated the OECD to develop a dedicated CARF framework that would allow automatic exchange of information on crypto assets. He said the Automatic Exchange of Information, first under FATCA and subsequently under the Common Reporting Standard, has given tax administrations across the world an effective means of addressing offshore tax evasion and safeguarding their tax bases.
Punit Agarwal, Founder of KoinX, said, “CARF marks the beginning of the end for ‘hidden’ crypto wealth across borders. While it doesn’t introduce a new tax, it fundamentally changes how tax authorities access crypto information. Over the next few years, crypto will become as transparent to tax authorities as traditional financial accounts.”
Vimal Sagar Tiwari, Co-Founder, CoinSwitch, said the guidance note provides much-needed operational clarity on how crypto service providers can meet their reporting obligations under the Income Tax Act. He described the operationalisation of the CARF as an important milestone that aligns India with evolving global standards on tax transparency.
According to Tiwari, a standardised reporting framework helps strengthen the integrity of the crypto ecosystem by creating a more level playing field, making it more difficult to underreport or conceal taxable crypto transactions through compliant platforms.
Edul Patel, CEO, Mudrex, called the note a significant step towards building a more transparent and credible digital asset ecosystem in India. He said that by aligning reporting standards with CARF, India is bringing crypto assets into a structured financial reporting framework without changing the existing tax regime.
Patel added that while the guidance note is focused on tax reporting rather than regulation, it lays an important foundation for a broader policy framework, and as reporting standards become more robust, policymakers will be better positioned to develop balanced regulations.
Context and Background
The guidance note follows the Parliamentary Standing Committee on Finance’s recent recommendation that the government examine the need for a statutory and regulatory framework for Virtual Digital Assets (VDAs). It also builds on the CBDT’s March 5, 2026 notification, which amended Rules 114F, 114G and 114H of the Income-tax Rules to classify crypto assets formally, Central Bank Digital Currencies (CBDCs), and specified electronic money products as financial assets for FATCA and CRS reporting, with retroactive effect from January 1, 2026.
India has committed to begin cross-border crypto data exchange under CARF from April 2027, joining a coalition of jurisdictions that have signed on to the OECD’s framework. The overall reporting architecture requires RCASPs in participating jurisdictions to collect due diligence information on account holders, report relevant transactions to their domestic tax authority, and rely on the tax authorities to exchange that data with peer jurisdictions under a Multilateral Competent Authority Agreement.
The move comes against the backdrop of an ongoing debate over crypto regulation in India, with the Reserve Bank of India pushing for tighter containment measures, the CBDT flagging tax evasion risks tied to peer-to-peer and offshore transactions, and industry bodies continuing to press for relief from the 30% flat tax and 1% TDS regime.
Roughly 72.7% of India’s crypto trading volume has already migrated to offshore platforms, and derivatives now account for over 80% of domestic exchange volumes, a shift industry participants attribute directly to the current tax structure.
While the guidance note does not resolve the larger regulatory question, it closes a significant operational gap for exchanges and gives investors greater visibility into how their transactions will be reported both at home and internationally in the years ahead.
Also Read: India Parliament Panel Urges Phased Crypto Regulation Under SEBI or RBI
