CBDT brings crypto under global tax reporting: What it means for investors

In a new guidance note, the CBDT laid down detailed reporting and due diligence obligations for crypto exchanges and other RCASPs to bridge the information gap created by crypto assets.

The Central Board of Direct Taxes (CBDT) has issued a 198-page guidance note to operationalise the Crypto-Asset Reporting Framework (CARF), a global system for reporting crypto transactions to tax authorities. The guidance lays down detailed reporting and due diligence obligations for crypto exchanges and other Reporting Crypto-Asset Service Providers (RCASPs), with the objective of closing the information gap created by crypto assets that can be held or transferred outside the traditional financial system.

 

The note is procedural in nature, but its implications extend beyond crypto platforms. Here's how the framework works and what it means for crypto investors.

 

What is CARF?

 

Developed by the Organisation for Economic Co-operation and Development (OECD) with G20 countries, CARF is a global tax transparency framework. It was created to address a growing challenge for tax authorities as crypto assets, unlike traditional bank accounts and financial products, can be held or transferred across borders with limited regulatory visibility.

 

 

Much like the Common Reporting Standard (CRS), which enables countries to automatically exchange information on offshore financial accounts, CARF extends that system to crypto assets. Under the framework, crypto exchanges and other reporting crypto-asset service providers collect and report information on users and their transactions to local tax authorities, which can then automatically share that data with other participating jurisdictions.

 

India has adopted the framework through the Income-tax Act, 2025, with the CBDT's guidance note laying down the reporting and due diligence obligations for crypto exchanges and other Reporting Crypto-Asset Service Providers (RCASPs).

 

Under the G20 New Delhi Leaders' Declaration, participating jurisdictions are expected to begin exchanging crypto-related tax information under CARF from 2027.

 

What changes for individual crypto investor?

 

The guidance note does not introduce any new tax provisions or reporting requirements for individual investors. This means the existing tax regime, including the 30 per cent tax on gains from virtual digital assets and the 1 per cent tax deducted at source (TDS) on specified transactions, remains unchanged.

 

Explaining the changes, Edul Patel, CEO of crypto trading app Mudrex, said, "The guidance note does not change the way crypto is taxed in India. The existing framework remains exactly the same, and investors do not have any new filing obligations under this framework. The key change is that crypto platforms will now report standardised transaction information to tax authorities."

 

"As a result, investors should maintain accurate records of their purchases, sales, transfers, and wallet movements, and ensure that their tax disclosures are consistent with their exchange records," Patel added.

 

Punit Agarwal, founder and CEO of crypto tax and portfolio tracking platform KoinX, said the practical impact is not a change in tax liability but in how quickly discrepancies between taxpayers' returns and exchange records may be detected.

 

"Right now, if your ITR and your exchange's TDS filing don't line up, that gets caught eventually, but often late and after the fact. Once RCASP reporting is standardised and filed annually, that comparison happens faster and closer to the transaction itself. So the practical change isn't a new liability. It's a shorter window between a mistake in your filing and the tax department noticing it," said Agarwal.

 

What happens if crypto is held on an overseas exchange?

 

The guidance note extends to crypto transactions carried out through overseas platforms as part of CARF. If a foreign crypto exchange operates in a jurisdiction that has adopted CARF and has an information-sharing arrangement with India, it may be required to identify Indian tax residents and report their crypto transactions to its local tax authority. That information can then be shared with Indian tax authorities through the framework's automatic exchange mechanism.

 

Explaining how this differs from India's existing tax rules, Agarwal said, “This is where CARF actually does something India's domestic TDS rules couldn't. TDS only applies cleanly when an Indian exchange is deducting it at the point of transaction. Foreign platforms have always sat outside that. CARF works differently: it relies on the exchange's home jurisdiction collecting and sharing the data with India, not on India taxing the transaction directly.”

 

“So an Indian using Binance or Coinbase should expect their activity on that platform to eventually show up in information India receives from the country where that exchange is regulated -- not because India taxed it at source, but because it was reported and shared,” he added.

 

What are the limitations?

 

While CARF is expected to significantly improve tax transparency for crypto transactions, experts said the new framework does not provide complete visibility into all crypto activity.

 

“CARF is not universal. Its effectiveness depends on participation by other jurisdictions and the availability of cross-border information-sharing arrangements. Certain activities, such as transactions on decentralised platforms or through self-custodied wallets without a reporting intermediary may also remain outside its scope,” Patel said.