The Central Board of Direct Taxes (CBDT) has issued detailed guidelines for the Crypto-Asset Reporting Framework (CARF), bringing India closer to global standards for tracking cryptocurrency transactions. The new framework follows the Organisation for Economic Co-operation and Development’s (OECD) reporting system and aims to improve tax transparency in the crypto sector.
The new rules do not introduce any additional tax on cryptocurrencies. Instead, they make it easier for tax authorities to collect information about crypto transactions and share it with other countries when required. Crypto exchanges, brokers, custodians, and other service providers will now have to collect more information from users and report it to tax authorities.
Crypto Exchanges Must Collect More User Information
The CBDT has issued these guidelines under the Income-tax Act, 2025, and the Income-tax Rules, 2026. It has also included crypto-assets under the Common Reporting Standard (CRS), allowing tax-related information to be shared with participating countries.
The reporting rules apply only to “relevant crypto-assets.” Central bank digital currencies (CBDCs), some electronic money products, and digital assets that are not used for investment or payments are not covered under these rules. The government has also clarified that cryptocurrencies are not legal tender in India, and only the Indian Rupee has that status.
The new reporting system started collecting data from January 1, 2026. The first exchange of crypto-related tax information with other participating countries is expected to take place in April 2027 and will cover transactions made during 2026.
Crypto exchanges and other reporting service providers must now complete detailed customer verification. They will have to collect users’ Permanent Account Number (PAN) or Taxpayer Identification Number (TIN), verify their tax residency, and maintain updated Know Your Customer (KYC) records.
The guidelines also require platforms to identify the actual owner of crypto assets if an account is being operated by an agent or intermediary. In addition, exchanges must report transfers made to self-hosted (unhosted) wallets by recording the wallet addresses involved.
Another important rule covers large retail crypto payments. If a platform helps process a crypto payment of more than $50,000 from a customer to a merchant while acting on behalf of the customer, it must report that transaction separately.
New Penalties for Non-Compliance
To ensure that reporting entities follow the new rules, the Union Budget 2026 introduced revised penalties under Section 446 of the Income-tax Act. These provisions came into effect on April 1, 2026.
A reporting crypto platform that fails to submit the required transaction details may have to pay a penalty of ₹200 for every day of delay. A separate penalty of ₹50,000 can also be imposed if a platform provides incorrect information, fails to correct errors, or does not complete the required customer verification process.
The CBDT has also introduced a reporting hierarchy to avoid the same transaction being reported multiple times in different countries. This system decides which country has the main responsibility for reporting a transaction.
It is important to note that these guidelines do not change India’s existing crypto tax rules. Investors will continue to pay a 30% tax on crypto gains under Section 115BBH, while the existing 1% Tax Deducted at Source (TDS) under Section 194S will continue to apply on eligible crypto transfers.
What It Means for Crypto Investors
Although tax rates remain unchanged, the new reporting framework is expected to give the Income Tax Department a much clearer picture of crypto transactions.
One issue that could affect active traders is the difference between total transaction value and actual profit. Exchanges report the full value of every crypto sale. This means a trader who repeatedly buys and sells using the same money may end up with a much higher reported transaction value than the actual profit earned.
If the transaction value reported by exchanges is much higher than the income declared in the Income Tax Return (ITR), it could trigger scrutiny from the Income Tax Department. Taxpayers may then have to explain the difference between the reported transactions and the income shown in Schedule VDA.
Tax authorities are also expected to use blockchain analysis, information from registered crypto exchanges, and other financial records to identify cases where crypto income has not been reported correctly.
Experts say investors should keep complete records of all crypto transactions, including trading history from Indian and foreign exchanges. They should also match these records with Form 26AS and Schedule VDA while filing their tax returns. Maintaining proper records of the fair market value of crypto assets at the time of buying and selling can also help if any questions arise later.
If investors discover mistakes or missed disclosures in previous tax returns, they may consider filing revised or updated returns wherever allowed under the law before receiving any notice from the tax department.
With international sharing of crypto tax information set to begin in 2027, the new CBDT guidelines mark a major step towards stronger regulation and better tax compliance in India’s growing cryptocurrency market.