CBDT issues new crypto reporting guidance: No new tax, but exchanges must track and report all transactions

The income tax department has issued a new guidance note on reporting of crypto assets, which is expected to bring in more transparency in disclosures primarily for the crypto exchanges. While no new taxes or procedures have been introduced through the guidance note, crypto investors would also have to ensure that their disclosures are in line with the reporting by crypto exchanges.

As per the Central Board of Direct Taxes, the Guidance Note intends to provide guidance to 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.

“Given that the Crypto-Asset Reporting Framework (CARF) is developed jointly by participating jurisdictions, including India, working with the OECD, the Commentary on CARF and other relevant materials have also been cited, so as to facilitate their reference by the RCASPs, where so required,” it said.

It further added nothing in this Guidance Note and FAQs will be construed as affecting the permissibility or otherwise, or the legitimacy or otherwise of the transactions in crypto-assets. “Further, nothing in the Guidance Note & FAQs shall be construed as a regulation in respect of transactions in crypto-assets,” it said.

The guidance note 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. It further clarifies that relevant crypto assets apply to all crypto assets except three – central bank digital currencies, specified electronic money products and crypto assets for which RCASP has adequately determined that they cannot be used for payment or investment purposes.

“Non-fungible tokens that are traded on a marketplace are treated as assets that can be used for payment or investment purposes and therefore would be considered Relevant Crypto-Assets,” it further said.

Welcoming the guidance note, tax experts said that the guidance note should be seen as a compliance and transparency measure rather than a substantive change in India’s taxation of crypto-assets.

Amit Agarwal, Senior Partner, Nangia & Co said RCASPs who are now required to collect, verify and report specified information relating to crypto transactions. The framework requires them 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.

“Therefore, CBDT is essentially creating an institutional reporting mechanism whereby crypto exchanges become the primary source of information for the tax authorities, much like banks and financial institutions currently do under other global reporting standards,” he said.