India’s Central Board of Direct Taxes (CBDT) has significantly expanded the scope of its international tax reporting framework, now requiring financial institutions to include specified crypto-assets, central bank digital currencies (CBDCs), and digital money products under the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) rules. The move, reported by The Economic Times, marks a major step toward treating digital assets like any other financial instrument for tax compliance.
The revised guidance mandates that banks, mutual funds, insurance companies, custodians, and other reporting institutions must now identify reportable accounts, verify customers’ tax residency, and report crypto-related financial information as part of India’s commitments under the Automatic Exchange of Information framework. Accounts with balances exceeding $1 million will face enhanced due diligence procedures, with additional review steps before classification for reporting.
This update aligns with global standards set by the Financial Action Task Force (FATF) and follows a series of recent regulatory actions. Earlier, India imposed a 30% tax on crypto income and a 1% tax deducted at source (TDS) on transactions. The Financial Intelligence Unit (FIU) also directed major exchanges to preserve records of over-the-counter (OTC) trades over $10,000. Internal government documents revealed that fewer than one-quarter of the 645,000 individuals who transacted in crypto during the fiscal year ending March 2023 disclosed those transactions in their tax returns, prompting the tighter rules.
While the Reserve Bank of India continues to advocate that cryptocurrencies should remain outside the regulated financial system, the latest reporting requirements place digital assets more firmly within the formal tax net. For investors, this means greater scrutiny and a need for accurate reporting of capital gains. Institutions face increased compliance costs but also clearer regulatory expectations, potentially fostering long-term market stability.
