Crypto exchanges to collect tax residency, ID details of users under new CBDT framework

New Delhi: India has aligned its cryptocurrency reporting rules with the OECD's global framework, requiring crypto exchanges and other digital asset intermediaries to collect users' tax residency and taxpayer identification details and share their transaction details annually with the Income Tax Department.

The Central Board of Direct Taxes (CBDT) on Saturday issued a detailed compliance framework for reporting crypto asset service providers (RCASPs) to comply with reporting obligations under Income Tax Act, 2025.

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The move operationalises India's commitment to the Crypto Asset Reporting Framework (CARF) developed by the Organisation for Economic Cooperation and Development (OECD) along with participating jurisdictions, including India.

CARF was designed to plug information gaps that allowed crypto assets to be held or transferred outside the traditional financial system, making it difficult for tax authorities to track cross border transactions.

The framework creates a common global reporting standard under which participating jurisdictions can automatically exchange information on reportable crypto transactions, much like the existing Common Reporting Standard for financial accounts.

India will start sharing data starting next financial year.

The CBDT's 198-page guidance note provides the first comprehensive operational roadmap for reporting agencies, explaining how exchanges and other reporting entities should undertake customer due diligence, determine the tax residency of users, collect prescribed taxpayer information, maintain records of reportable crypto transactions and furnish annual reports to tax authorities.

It clarified that the guidance note is meant only to explain the reporting obligations contained in the notified rules and draws upon the OECD's CARF commentary and related material to assist reporting entities.

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It has also stated that in the event of any inconsistency, the provisions of the I-T Act and Rules will prevail. The document further emphasises that it neither determines the legitimacy or permissibility of crypto assets nor constitutes a regulatory framework for crypto transactions.

"The new framework is expected to strengthen the tax authorities' ability to monitor cross-border crypto transactions and address potential tax evasion through international exchange of information," said Amit Maheshwari, managing partner at AKM Global, a tax and consulting firm.