Tax dept puts out guidance note on crypto asset reporting aligned with OECD framework: What this means
The Central Board of Direct Taxes (CBDT) issued a guidance note on reporting obligations for crypto-asset transactions, aligning India's framework with the OECD's Crypto-Asset Reporting Framework (CARF)
The note operationalises reporting requirements under the Income-tax Act, 2025, shifting the primary compliance burden from individual investors to Reporting Crypto-Asset Service Providers (RCASPs), such as exchanges and platforms
The guidance does not introduce any new tax on crypto assets; it clarifies how existing reporting obligations are to be implemented
India has committed to begin cross-border automatic exchange of crypto-asset data under CARF from 2027, joining other jurisdictions that have adopted the framework
OECD Crypto-Asset Reporting Framework (CARF)
CARF is a global standard developed by the OECD to enable automatic exchange of information (AEOI) on crypto-asset transactions between tax jurisdictions, extending the logic of the existing Common Reporting Standard (CRS) — which covers traditional financial accounts — to crypto-assets that can otherwise move outside the regulated financial system.
Key Details
- Consultation draft published by the OECD in 2022; final report adopted by the OECD in 2023
- Requires "Reporting Crypto-Asset Service Providers" to collect and report user transaction data to their home tax authority, which then exchanges it with the tax authorities of the users' countries of residence
- Works alongside the amended CRS, together forming the OECD's international standards for automatic exchange of information in tax matters
- Multiple jurisdictions have signed the CARF Multilateral Competent Authority Agreement (MCAA) to give effect to the exchange
The CBDT guidance note is India's domestic implementation step to prepare Indian crypto exchanges to collect and report the data required under CARF ahead of India's committed 2027 start date for cross-border exchange.
Income-tax Act, 2025 — Section 509 (Crypto-Asset Reporting)
The Income-tax Act, 2025, replaced the Income-tax Act, 1961, and re-enacted its crypto-reporting provision as Section 509 (corresponding to the earlier Section 285BAA of the 1961 Act). It requires "prescribed reporting entities" — effectively crypto exchanges and intermediaries — to furnish periodic statements of crypto-asset transactions to tax authorities.
Key Details
- Section 509 obligations for reporting entities take effect from April 1, 2026
- The provision empowers the Central Government to prescribe the form, manner, and periodicity of reporting, along with registration and due-diligence requirements for reporting entities
- Includes a compliance mechanism: a window for rectifying defective statements and a further short window for voluntary correction of inaccuracies
- Complements — but is separate from — the taxation of crypto gains, which is governed by a different provision (Section 115BBH of the Income-tax Act, 1961/its successor provision under the 2025 Act)
The CBDT's guidance note explains how Section 509's reporting mechanism will function in practice for Indian and foreign crypto platforms serving Indian users, ahead of the provision taking effect.
Taxation of Virtual Digital Assets (VDAs) in India
India introduced a distinct tax regime for "Virtual Digital Assets" (cryptocurrencies, NFTs, and similar assets) through the Finance Act, 2022, well before the current reporting-framework alignment. This existing tax regime is separate from — but related to — the new reporting obligations.
Key Details
- Section 115BBH (introduced by Finance Act 2022, effective April 1, 2022): flat 30% tax on income from transfer of VDAs, with no deduction allowed except cost of acquisition; losses cannot be offset against other income or carried forward
- Section 194S (effective July 1, 2022): mandates 1% Tax Deducted at Source (TDS) on consideration paid for transfer of VDAs, with thresholds of ₹50,000/year (specified persons) or ₹10,000/year (others) below which TDS does not apply
- Each VDA is treated as a separate asset class — losses on one VDA cannot be set off against gains on another
- The new reporting framework (CARF/Section 509) is designed to close the information gap that made enforcement of this existing 30% tax and 1% TDS regime difficult, since crypto holdings could previously be held outside traditional, easily-traceable financial channels
The CBDT guidance note strengthens enforcement of the pre-existing 30% VDA tax and 1% TDS regime by ensuring exchanges systematically report transaction data, rather than relying on voluntary investor disclosure.
- OECD CARF: consultation draft 2022, final report adopted 2023
- India's committed start date for cross-border CARF data exchange: 2027
- Income-tax Act, 2025, Section 509 (crypto-asset reporting): effective from April 1, 2026; corresponds to Section 285BAA of the Income-tax Act, 1961
- Existing VDA tax rate under Section 115BBH: flat 30% (plus surcharge and cess), effective April 1, 2022
- TDS on VDA transfers under Section 194S: 1%, effective July 1, 2022; threshold ₹50,000/year (specified persons) or ₹10,000/year (others)
- CARF operates alongside the amended Common Reporting Standard (CRS) as the OECD's twin instruments for automatic exchange of tax information