CBDT’s Crypto Asset Reporting Guidance Raises Compliance Bar For Exchanges

In a bid to address the taxation related complexities of crypto trading in India, the Central Board of Direct Taxes (CBDT) issued a new guidance outlining the reporting and due diligence obligations of crypto exchanges and other service providers.

Crypto-Asset Reporting Framework (CARF), which applies to all crypto transactions beginning calendar year 2026, will mandate crypto service providers to identify reportable users, establish their tax residency and file details of specified transactions through Form 167 by May 31 of the following year.

The requirements will be introduced under Section 509 of the Income Tax Act, 2025, and Rules 241 to 244 of the Income Tax Rules, 2026.

The framework seeks to address the limited visibility available to tax authorities over trading platforms when crypto-assets are held or transferred outside the traditional financial system and across national borders.

However, the CBDT clarified that the guidance does not impose a new tax on virtual digital assets or change their existing tax treatment. It also does not determine whether crypto transactions are legal or permissible in India.

What Changes For Crypto Exchanges?

CARF effectively brings cryptocurrencies, security tokens and some NFTs within the scope of tax authorities regulatory oversight. 

The framework will apply to exchanges, brokers and dealers to India, who would be responsible for collecting and verifying users’ tax-residency details. This includes foreign taxpayer identification numbers, and seek fresh declarations, if existing information becomes unreliable.

They will also have to report acquisitions, disposals, crypto-to-crypto trades and transfers, with transaction values calculated in rupees. Transfers to unidentified external wallets will be reported in aggregate, while wallet addresses must be retained for at least seven years.

Giottus’ CEO Vikram Subburaj said the framework addresses the limited visibility available to tax authorities when crypto users or service providers operate across borders.

He said India’s 30% tax on VDA gains, 1% TDS and the inclusion of crypto service providers under the Prevention of Money Laundering Act had already created a domestic transaction and compliance trail. CARF, he added, introduces a cross-border reporting layer.

“Most exchanges maintain customer, banking, trading and blockchain information in different systems. CARF will require those records to be connected,” Subburaj said.

Industry Sees Greater Reporting Clarity

Crypto exchanges broadly welcomed the guidance, saying it would bring greater certainty to compliance, strengthen tax transparency and create more consistent reporting standards across the industry.

CoinSwitch cofounder Vimal Sagar Tiwari said the framework would align India with evolving global standards on tax transparency and create a more level playing field for regulated platforms.

“The CBDT’s guidance note provides much-needed operational clarity on how crypto service providers can meet their reporting obligations under the Income Tax Act. The operationalisation of the OECD’s Crypto-Asset Reporting Framework (CARF) is an important milestone that aligns India with evolving global standards on tax transparency,” Tiwari said.

He added that consistent reporting standards would make it harder to conceal or underreport taxable transactions through compliant platforms while improving trust among investors, exchanges and regulators.

The framework would also strengthen due diligence and reporting requirements, particularly for cross-border and non-resident transactions. 

Meanwhile, WazirX vice president Rajagopal Menon highlighted how these would help improve accurate reporting in the industry. Reporting for exchanges like WazirX has become increasingly important as investors often trade across multiple platforms and may have to reconcile hundreds of transactions manually.

“Exchanges have an important responsibility to maintain robust reporting standards, enable transparent record-keeping and help users meet their tax obligations with confidence,” Menon said.

He added that automated tax-reporting tools could help track trades, transfers and taxable events, reduce reconciliation errors and improve the quality of information available to reporting entities.

The guidance primarily places reporting obligations on crypto service providers and does not create an additional filing requirement for individual taxpayers.

However, greater access to transaction-level information will make it more important for taxpayers to ensure that disclosures in their income tax returns are consistent with records maintained by crypto exchanges.

The new reporting rules come at a time when the crypto industry is also pushing for a proper regulatory framework, beyond just taxes and compliance. A few days prior, the Parliamentary Standing Committee recently suggested an interim system for virtual digital assets through a recognised self-regulatory organisation under a designated regulator.

The recommendations are not binding, and CARF itself is only meant to improve tax reporting and information sharing. Still, industry players see these developments as a sign that policymakers are beginning to engage more seriously with crypto regulation. India, however, still does not have a dedicated law governing the sector.

Edited by Akshit Pushkarna

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