CBDT Issues Crypto-Asset Reporting Guidance Aligned with OECD Framework

Syllabus: GS3/ Economy

Context

• The Central Board of Direct Taxes has released a guidance note on crypto-asset reporting obligations, under the Income-tax Act, 2025, aligning India’s tax reporting framework with the Organisation for Economic Co-operation and Development’s (OECD) Crypto-Asset Reporting Framework (CARF).

Need for Guidance Note

• The rapid growth of crypto-assets has made it easier to transfer and hold assets outside the traditional financial system, making tax evasion more difficult to detect.
• Existing global tax reporting standards, such as the Common Reporting Standard (CRS), do not adequately cover crypto-assets.
• Therefore, India has aligned its reporting framework with the OECD Crypto-Asset Reporting Framework (CARF) to improve tax compliance and international cooperation.

What are Crypto Assets?

• The CARF defines “Crypto-Assets” as “a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions”, which includes cryptocurrencies, as well as cryptographybased tokens. 
• A “digital representation of value” means that a Crypto-Asset must represent a right to value, and that the ownership of, or right to, such value can be traded or transferred to other individuals or entities in a digital manner. 

What is the OECD Crypto-Asset Reporting Framework (CARF)?

• The Crypto-Asset Reporting Framework (CARF) is a global tax transparency framework developed by the OECD in 2022, and it was endorsed by the G20 Bali Leaders’ Declaration (2022).
  • The Global Forum on Transparency and Exchange of Information for Tax Purposes is monitoring its implementation.
• Objective: To ensure that tax authorities receive information on crypto transactions similar to the information they already receive for bank accounts under the Common Reporting Standard (CRS).
• The framework applies to:
  • Relevant Crypto-Assets, including cryptocurrencies and other crypto-assets that can be used for payment or investment purposes.
  • Reporting Crypto-Asset Service Providers (RCASPs), such as crypto exchanges, brokers, dealers, and other intermediaries that facilitate crypto transactions.
  • Both domestic and cross-border crypto transactions undertaken through reporting service providers.

Key Provisions of the Guidance Note

• Reporting obligations of Crypto-Asset Service Providers are as;
  • Conduct Know Your Customer (KYC) verification.
  • Determine the tax residency of every customer.
  • Collect the Taxpayer Identification Number (TIN) and self-certification from users.
  • Maintain records of all reportable crypto transactions.
  • File annual reports through Form 167.
  • Preserve records for verification and comply with reporting timelines.

Significance 

• Curbs Tax Evasion: It reduces the possibility of concealing crypto income and offshore crypto holdings.
• Promotes Data-Driven Tax Administration: Tax authorities will have access to verified transaction-level information, improving risk assessment and tax enforcement.
• Aligns India with Global Standards: It harmonises India’s reporting framework with internationally accepted OECD standards.

Source: IE