Govt amends I-T rules: Crypto, digital money now under reporting framework

From January 2026, crypto-assets, CBDCs and electronic money products will fall under India's expanded FATCA-CRS reporting regime, strengthening tax transparency and compliance

The government has expanded the scope of financial accounts that must be reported by financial institutions under the tax information-sharing framework, bringing crypto assets, central bank digital currencies (CBDCs), and certain electronic money products within the reporting net.

 

The changes, notified by the Central Board of Direct Taxes (CBDT) through the Income-tax (Amendment) Rules, 2026 on Thursday, amend Rules 114F, 114G and 114H of the Income-tax Rules governing due diligence and reporting obligations under India’s implementation of the automatic exchange of financial account information regime.

 

Effective January 1, 2026, the amendments expand the definition of financial assets to include “relevant crypto assets” and incorporate CBDCs and specified electronic money products into the framework used by financial institutions to identify and report accounts held by foreign tax residents under the US Foreign Account Tax Compliance Act (Fatca) and the Organization for Economic Cooperation and Development's (OECD’s) Common Reporting Standard (CRS).

 

The notification defines a “relevant crypto asset” as any crypto asset that is not a CBDC or a specified electronic money product and that can be used for for payment or investment purposes unless determined otherwise. The amendments also introduce the concept of “specified electronic money products”, defined as digital representations of fiat currency issued on receipt of funds and redeemable at par value, which can be used for payment transactions.

 

According to Sandeep Bhalla, partner with Dhruva Advisors, the amendments strengthen India's tax transparency framework and reflect global developments by the OECD, particularly the introduction of the crypto-asset reporting framework (CARF) and updates to the CRS. The amendments also align due diligence procedures more closely with anti-money laundering and know-your-customer processes under the Prevention of Money Laundering Act (PMLA).

 

"By bringing crypto assets, electronic money products, and CBDCs within the reporting ecosystem, India is ensuring that cross-border tax transparency keeps pace with the rapidly evolving digital financial landscape," added Bhalla.

 

Financial institutions will now be required to maintain and report additional information for non-US reportable accounts, including whether the account holder has provided a valid self-certification, whether the account is joint, and the type and status of the account. For entity accounts, Reporting Financial Institutions (RFIs) must also report the specific role (e.g., as a controlling person) of reportable individuals, enhancing beneficial ownership transparency and aiding in the identification of ultimate account controllers. Exemptions have been provided for low-value accounts, such as depository accounts representing specified electronic money products where the rolling average 90-day end-of-day aggregate balance or value does not exceed $10,000 on any day during the calendar year or other reporting period.

 

The rules further clarify that financial institutions may not be required to separately report gross proceeds from sale or redemption of financial assets where such transactions are already reported under the CARF. The rules refine due diligence by treating accounts newly classified under the expanded CRS definitions as new accounts from January 1, 2026, or pre-existing if held as of December 31, 2025.

 

Where PMLA does not mandate information collection, RFIs must apply substantially similar procedures to determine controlling persons. Additionally, the notification provides definitions and reporting rules for “qualified non-profit entities”, referring to organisations established exclusively for charitable, religious, educational or social welfare purposes and exempt from income tax. Such entities must meet conditions including absence of shareholders with beneficial interests, and restrictions on distribution of income or assets. To facilitate a smooth transition, for accounts existing as of December 31, 2025, details on controlling persons or equity interest holders must be reported over the next two years only if such information is readily available in the RFI’s electronically searchable data.