In a bid to streamline crypto-asset disclosures, the Central Board of Direct Taxes has published guidelines explaining the reporting rules under the Income Tax Act, 2025. The updated framework mirrors the Organisation for Economic Co-operation and Development's Crypto-Asset Reporting Framework.
Issued for Reporting Financial Institutions (RFIs), including businesses offering crypto-asset services, the guidelines provide a roadmap for complying with the latest reporting rules.
There is no revision to the tax treatment of investors. The existing 30% levy on profits from Virtual Digital Assets (VDAs) and the 1% TDS on qualifying transactions remain in force. The update primarily affects the reporting process, with crypto exchanges now required to follow a standardised mechanism for sharing transaction data with the Income Tax Department.
No new Income Tax Return (ITR) form or extra compliance requirement has been introduced for investors under the guidance note. Instead, it establishes a standardised reporting framework for crypto exchanges, enabling the Income Tax Department to cross-check taxpayer disclosures with greater ease.
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The changes are intended to enhance tax compliance and reporting standards, not create a new tax. The Income Tax Department will instead gain access to more reliable, standardised and internationally harmonised information on crypto transactions.
There is no change to the tax burden on crypto investors under the CBDT's latest guidance. The 30% tax on gains and the 1% TDS remain in place. What changes is the reporting framework, as crypto exchanges will no longer rely on different reporting formats.
Under Section 509 of the Income Tax Act, 2025, crypto exchanges will be required to submit annual reports through Form 167. The reporting requirement will cover transactions carried out during the 2026 calendar year, with the first set of filings scheduled for 2027.
With exchange data set to be cross-checked against taxpayers' Income Tax Returns (ITRs) under a unified reporting system, investors should ensure their records are complete and free from discrepancies from 2026 onwards.
The filing process for taxpayers remains unchanged, though they should make sure the information disclosed in their Income Tax Returns (ITRs) aligns with the data available with crypto exchanges.
Investors must retrieve annual statements from every exchange where they have traded, including dormant accounts. They should also compare TDS certificates with the crypto income declared in their tax returns, especially if investments span multiple exchanges. Reviewing all transaction details before filing is advisable, given that the updated reporting system is likely to flag discrepancies at a much earlier stage.
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