The Central Board of Direct Taxes (CBDT) has issued guidelines on the compliance framework for reporting crypto-asset service providers (RCASPs) under the Crypto-asset Reporting Framework (CARF), which requires crypto exchanges and other digital asset intermediaries to comply with tax reporting obligations under the Income Tax Act, 2025.
The CBDT’s comprehensive guidance note outlining reporting obligations for crypto exchanges and other intermediaries marks a significant step towards bringing virtual digital asset (VDA) transactions under a more structured tax reporting framework.
This follows the Parliamentary Standing Committee on Finance's recent recommendation that the government examine the need for a statutory and regulatory framework for VDAs.
Experts point out that CBDT's guidance note is a significant step towards building a more transparent and credible digital asset ecosystem in India. By aligning reporting standards with the OECD's Crypto-Asset Reporting Framework (CARF), India is bringing crypto-assets into a structured financial reporting framework without changing the existing tax regime.
“While the guidance note is focused on tax reporting rather than regulation, it lays an important foundation for a broader policy framework. As reporting standards become more robust, policymakers will be better positioned to develop balanced regulations that protect investors while enabling innovation. The industry has long advocated for regulatory clarity, and this marks another meaningful step towards a comprehensive framework for digital assets in India,” pointed out Edul Patel, CEO, Mudrex.
This expert further points out that the Parliamentary Standing Committee has correctly identified the current exclusion of Virtual Digital Assets (VDAs) from India's securities framework as a regulatory grey area rather than a settled policy position.
“The committee’s observations echoed the industry’s long-standing concern that the lack of consumer protections and market conduct norms leaves investors with limited remedies to fraud, market manipulation and various other risks while stunting market development,” added Patel.
Interestingly, among major global economies, India remains an outlier with no interim crypto policy in place.
Japan has brought crypto assets under its securities law, on par with stocks and bonds. The US applies the Howey test to bring security-like tokens under existing law.
Singapore's Securities and Futures Act does the same for qualifying crypto assets. The UK has introduced dedicated Cryptoassets Regulations this year, and the EU's MiCA operates as a framework for crypto assets not already covered by existing regulations.
“While we await a comprehensive policy framework, the Committee’s recommendation for an interim, Self-Regulatory Organisation (SRO)-led mechanism under a designated regulator's oversight is a practical and proportionate first step. India’s crypto industry is well-placed to adopt a framework built around governance standards, disclosure, investor protection and grievance redressal while the broader legislative conversation continues,” said Patel.
Industry experts are of the view that digital assets can be issued, held and transferred across borders outside the traditional financial system, making consistent reporting a challenge for tax authorities globally.
“The introduction of the Crypto-Asset Reporting Framework (CARF) by the OECD is an important step towards closing this gap. By enabling the exchange of crypto-asset information between jurisdictions, CARF will reduce the regulatory arbitrage between jurisdictions and create a more level playing field for compliant local businesses.
Interestingly, as per the OECD, India continues to remain a jurisdiction identified by the global forum as relevant to the CARF, which has not yet (officially) committed to implement the CARF; however, CBDT's adoption of these reporting standards reflects its intent to align with global best practices while strengthening oversight of cross-border digital asset transactions,” remarked Manhar Garegrat, India Head, Liminal Custody.
Industry analysts say that is basically similar to how banks operate today. Banks are authorised dealers and have reporting obligations to the RBI for foreign exchange transactions. They are also responsible for carrying out KYC and AML checks, effectively acting as the first line of compliance on behalf of the regulator.
“In crypto, there is no dedicated regulator. That creates a fundamental challenge. Even if exchanges are expected to play a role similar to banks, they need clarity on what data should be reported, how it should be reported, and to whom. Without a defined regulatory framework, there will always be gaps and inconsistencies. If reporting standards are not uniform, it can lead to inaccurate tax reporting. Investors may end up overpaying or underpaying taxes, while the government may not receive complete or reliable information. This makes compliance unnecessarily complicated for all stakeholders,” observed Sidharth Sogani Jain, Founder, CEO and Fund Manager at Blue Aster Capital and CREBACO Global.
He says that what India needs is a regulator with a clear set of guidelines, supported by a well-defined reporting framework. “Once standardised reporting obligations are established, and there is a regulator to review and supervise them, the entire ecosystem becomes far more transparent, efficient and easier to monitor,” added Jain.
Many analysts feel that the CBDT’s guidance on crypto-asset reporting is an important step towards aligning India’s digital asset ecosystem with global reporting standards under the OECD’s Crypto-Asset Reporting Framework (CARF). The framework strengthens reporting and due diligence obligations for crypto-asset service providers, particularly for cross-border and non-resident transactions.
“Enhanced transparency and standardised reporting can help foster greater trust, improve regulatory coordination across jurisdictions, and support the long-term maturation of the crypto ecosystem. As the industry evolves, clear compliance frameworks will be critical in balancing innovation with accountability,” said Pranav Pagaria, Head of Finance and Strategy, CoinDCX.
