CBDT issues crypto reporting guidelines for exchanges under Income-tax Act 2025

The Central Board of Direct Taxes (CBDT) has issued a comprehensive guidance note to help crypto-asset service providers comply with the reporting requirements under the Income-tax Act, 2025. The document does not introduce a new tax regime for virtual digital assets but provides clarity on how crypto exchanges and other intermediaries should report transactions in line with existing tax laws.

The guidance also marks the implementation of India's adoption of the Organisation for Economic Co-operation and Development's (OECD) Crypto-Asset Reporting Framework (CARF), a global system designed to facilitate the automatic exchange of tax-related information on crypto-assets among participating countries.

"India’s commitment to combating tax evasion and protecting its revenue base has remained steadfast. The rapid growth of crypto-assets, however, brought with it a fresh challenge," Ravi Agarwal, Chairman, CBDT writes in the note.

"Assets that can be issued, held and transferred outside the traditional financial system, across national borders, and may escape the reporting obligations applicable to financial institutions...Recognising this risk, the G20 mandated the OECD to develop a dedicated framework for the automatic exchange of information on crypto-assets," Agarwal said.

According to the CBDT Chairman, the Crypto-Asset Reporting Framework has been endorsed by the G20 as an important enhancement to international standards for the exchange of tax information.

"This Guidance Note has been prepared to assist Reporting Crypto-Asset Service Providers (RCASPs) in understanding and discharging their obligations under the Income-tax Act and Income-tax Rules in a clear and practical manner," the note said.

The guidance defines a crypto-asset as a "digital representation of value" that uses a cryptographically secured distributed ledger or similar technology to validate and secure transactions.

It explains that a digital representation of value refers to an asset that represents an economic right or value, with ownership or rights that can be digitally transferred or traded between individuals or entities.

However, the note clarifies that not every crypto-asset falls within the reporting requirements of the Income-tax Act, 2025 and the Income-tax Rules, 2026. Only "relevant crypto-assets" are subject to reporting and due diligence obligations for Reporting Crypto-Asset Service Providers (RCASPs).

"The definition of crypto asset is thus functional and does not depend on labels that may be used to describe it, such as cryptocurrency, security token, or non-fungible token, all of which may be crypto assets. For instance, a token based on cryptography that allows individuals to store value, engage in payments and that does not represent any claims or rights of memberships against a person, rights to property or other absolute or relative rights is a Crypto-Asset," said the note.

Certain categories are specifically excluded from reporting requirements, including Central Bank Digital Currencies (CBDCs), specified electronic money products, and crypto-assets that an RCASP has reasonably determined cannot be used for investment or payment purposes.

The guidance requires every RCASP to identify all reportable users and reportable persons whose information must be submitted to tax authorities.

Reportable persons include crypto-asset users who are tax residents of jurisdictions outside India, as well as controlling persons of certain entity users that do not qualify as active entities or are otherwise not exempt from reporting.

To determine who must be reported, RCASPs are required to examine their customer base, identify users eligible for exclusions, and follow the due diligence procedures prescribed under the Income-tax Rules.

Once an individual or entity is classified as reportable, the service provider must furnish relevant information to the tax authorities. This includes details needed to identify the reportable person as we...