Crypto exchanges to collect tax residency, ID details of users under new CBDT framework
The Central Board of Direct Taxes (CBDT) issued a compliance framework requiring crypto exchanges and other digital asset intermediaries to collect users' tax residency and identification details
Reporting responsibility is placed primarily on Reporting Crypto-Asset Service Providers (RCASPs) — exchanges, brokers, and custodial wallet providers — rather than on individual investors
The framework aligns India's domestic reporting rules with the OECD's global Crypto-Asset Reporting Framework (CARF)
Cross-border data sharing with participating jurisdictions is set to begin from the next financial year
Taxation of Virtual Digital Assets — Sections 115BBH and 194S
The Finance Act, 2022 introduced a dedicated tax regime for Virtual Digital Assets (VDAs) — a term defined under Section 2(47A) of the Income-tax Act, 1961 to cover cryptocurrencies, NFTs, and similar digital assets. Section 115BBH taxes income from transfer of VDAs at a flat 30% rate (plus surcharge and cess), with no distinction between short-term and long-term gains, and disallows any deduction other than cost of acquisition. Section 194S separately mandates TDS on VDA transfers.
Key Details
- Section 115BBH: flat 30% tax on VDA transfer income, effective from 1 April 2022; losses cannot be set off against other income or carried forward
- Section 194S: 1% TDS on VDA transfer consideration, introduced via Finance Act 2022; threshold ₹50,000/year for specified persons and ₹10,000/year for others; TDS rises to 20% if the payee does not furnish PAN
- These provisions govern the tax liability itself, while the new CBDT framework governs information collection and reporting — a distinct, complementary compliance layer
The new residency/ID-collection framework does not change the 30%/1% tax rates — it strengthens the information base RCASPs must maintain so that VDA transactions already taxable under Sections 115BBH and 194S can be cross-verified against exchange-reported data.
OECD Crypto-Asset Reporting Framework (CARF) vs. Common Reporting Standard (CRS)
CARF is a global tax transparency standard developed by the OECD to enable automatic exchange of information on crypto-asset transactions between tax jurisdictions, extending the logic of the older Common Reporting Standard (CRS, 2014) — under which India already exchanges financial account information — into the crypto space. Unlike CRS, which covers "Financial Institutions" and reports account balances, CARF covers Reporting Crypto-Asset Service Providers (RCASPs) and requires transaction-level reporting, since crypto-assets can move across jurisdictions instantly without a traditional custodian account.
Key Details
- CRS: OECD standard from 2014, automatic exchange of financial account information among adopting jurisdictions, covers Financial Institutions
- CARF: newer OECD framework extending transparency to crypto-assets (cryptocurrencies, stablecoins, certain NFTs); covers RCASPs; requires transaction-level (not just balance) data
- The CRS itself has also been amended ("CRS 2.0") to bring central bank digital currencies (CBDCs) and specified e-money products within its scope, avoiding double reporting with CARF
- India has targeted 1 April 2027 for full domestic CARF enforcement, alongside the multilateral Competent Authority Agreement for exchanging this data
The CBDT's new residency/ID-collection requirement for exchanges is the domestic implementation step that operationalises CARF ahead of India's international data-exchange commitments.
CBDT as an Institutional Body
The Central Board of Direct Taxes (CBDT) is the apex administrative authority for direct taxes in India, functioning under the Department of Revenue, Ministry of Finance. It is constituted under the Central Boards of Revenue Act, 1963 and is responsible for framing rules, issuing circulars/notifications, and administering the Income-tax Act, 1961 through the Income Tax Department.
Key Details
- Statutory basis: Central Boards of Revenue Act, 1963
- Functions under: Department of Revenue, Ministry of Finance
- Distinct from CBIC (Central Board of Indirect Taxes and Customs), which handles GST and customs
- CBDT issues detailed guidance notes/rules (as with this crypto reporting framework) under powers delegated by the Income-tax Act, 1961 and related rules
The compliance framework for crypto exchanges was issued by CBDT under its rule-making powers, giving statutory-level backing to what is otherwise an OECD-driven international commitment.
India's Global Tax Transparency Commitments — FATCA and CRS/CARF
India has progressively signed on to international automatic-exchange-of-information regimes to combat cross-border tax evasion, beginning with the India-US FATCA Inter-Governmental Agreement (2015) and CRS participation, and now extending into crypto via CARF. These commitments require Indian financial and, increasingly, crypto intermediaries to identify account holders' tax residency and report data annually to CBDT, which then exchanges it with partner-country tax authorities.
Key Details
- India-US FATCA IGA: signed 2015, requires reporting of US-person accounts held in India
- India participates in CRS-based automatic exchange of information via the Multilateral Competent Authority Agreement (MCAA)
- New rules bring VDAs, CBDCs, and digital wallets under this FATCA/CRS-style reporting net, with domestic CARF enforcement targeted for 1 April 2027
- Data sharing with participating jurisdictions under the new crypto framework is set to begin from the next financial year
This framework extends India's existing FATCA/CRS-style transparency architecture — built for bank accounts — to crypto exchanges, closing an information gap that previously let VDA transactions escape cross-border reporting.
- VDA transfer tax rate: flat 30% under Section 115BBH (effective 1 April 2022)
- TDS on VDA transfers: 1% under Section 194S; threshold ₹50,000 (specified persons)/₹10,000 (others); 20% without PAN
- CBDT constituted under: Central Boards of Revenue Act, 1963
- India's targeted domestic CARF enforcement date: 1 April 2027
- Reporting entities under the new framework: Reporting Crypto-Asset Service Providers (RCASPs) — exchanges, brokers, custodial wallet providers
- Cross-border data sharing with partner jurisdictions: to begin from the next financial year