CBDT’s Crypto Reporting Rules Catch Up With Offshore Traders

The Central Board of Direct Taxes has told crypto exchanges exactly how to report user transactions under India’s new tax code. The move activates India’s version of a worldwide system built to track crypto wealth across borders, without changing anyone’s tax rate.

That reporting duty lands hardest on one group: traders who moved money to foreign exchanges after 2022’s tax rules made trading at home expensive. A growing list of those offshore havens has now signed up to report crypto holdings back to India anyway.

A 198-Page Manual for Crypto Exchanges

The guidance note runs to 198 pages, according to reporting on the document, and it does one job: it tells Reporting Crypto-Asset Service Providers, or RCASPs, how to comply with Section 509 of the Income-tax Act, 2025, and Rules 241 to 244 and Form 167 of the Income-tax Rules, 2026.

The tax department was careful to draw a line around what the note is not. It does not create a new tax on virtual digital assets. It does not legitimize crypto trading, and it is not a regulatory framework for the sector. It is, in the Central Board of Direct Taxes’ own words, meant to help crypto intermediaries understand and discharge obligations that already exist.

Ravi Agarwal, the Central Board of Direct Taxes’ chairman, framed the problem the note is solving. “India’s commitment to combating tax evasion and protecting its revenue base has remained steadfast,” he wrote in the note. “The rapid growth of crypto assets, however, brought with it a fresh challenge.”

The G20 Ordered This Rulebook Years Ago

Crypto broke a basic assumption behind decades of tax treaties: that money moves through banks, and banks answer to regulators. Assets that can be issued, held and transferred peer to peer, across borders, without ever touching a bank, could slip past the reporting duties that apply to ordinary financial institutions.

Recognising this risk, the G20 mandated the OECD to develop a dedicated framework for the automatic exchange of information on crypto-assets.

Agarwal wrote that line in the guidance note. The Organisation for Economic Co-operation and Development answered with the Crypto-Asset Reporting Framework, a system the Group of Twenty endorsed as a companion to the older account-reporting rules banks already follow. The United Kingdom’s tax authority has published its own crypto reporting compliance manual for the same framework, since India is not the only country writing domestic rules to match it.

What Counts as a Reportable Crypto-Asset?

A reportable crypto-asset, under the CBDT’s definition, is a digital representation of value secured by cryptography or similar technology, where ownership can be transferred or traded between people. The label attached to it does not matter. A cryptocurrency, a security token and a non-fungible token can all qualify if they carry transferable economic value and do not represent membership rights, property claims or other legal entitlements against a person.

Not every crypto-asset triggers reporting, though. The guidance carves out three categories:

• Central Bank Digital Currencies – a digital rupee or any other CBDC issued directly by a monetary authority sits outside the reporting net entirely.
• Specified electronic money products – prepaid instruments and e-money pegged to a single fiat currency are excluded.
• Non-investment tokens – assets an exchange has reasonably determined cannot be used for investment or payment fall outside the definition.

Everything else gets swept into a category the guidance calls relevant crypto-assets, and only those trigger due diligence and reporting duties for exchanges.

The 2022 Tax Shock Sent Traders Offshore

None of this happens in a vacuum. India taxes crypto gains at a flat 30%, with no deduction for losses or most expenses, a rule that has stood since 2022. That same year, a 1% tax deducted at source kicked in on transactions above 50,000 rupees a year, dropping to 10,000 rupees for certain categories of traders.

The response was immediate and lasting. Trading volumes on Indian platforms such as WazirX and CoinDCX cratered within weeks of the TDS rule taking effect, as traders shifted to Binance, OKX and other platforms with no Indian address. By some estimates, roughly 73% of Indian crypto trading now happens on foreign exchanges, with cumulative capital flight put at around $6.1 billion.

That flight was not accidental. Offshore exchanges did not withhold tax at source, did not sit under CBDT’s reporting umbrella, and gave Indian traders a way to keep trading without the 1% bite on every transaction. For three years, that gap held.

Four Years, One Closing Loophole

The guidance issued this week is the latest step in a sequence that started with the tax shock itself.

1. 2022: India imposes its flat 30% tax on virtual digital asset gains and a 1% TDS, and trading volume begins draining toward foreign platforms.
2. November 2023: The OECD and dozens of jurisdictions issue a joint statement committing to adopt the Crypto-Asset Reporting Framework by 2027.
3. January 2026: Due diligence and data collection begin under the first-wave jurisdictions’ domestic CARF rules, India included.
4. 2027: The first automatic exchange of crypto-asset data among committed jurisdictions takes place, covering transactions collected the prior year.

Each step narrowed the gap the 2022 tax rules opened. The guidance note is India telling its own exchanges how to hold up their end of that chain.

The Offshore Havens Signed the Same Rulebook

The jurisdictions that absorbed India’s offshore trading volume are not standing outside CARF. Most of them helped write it, or signed on early.

The original 2023 pledge carried 48 signatures. That list has since grown to more than fifty jurisdictions committed by 2027, spanning European Union member states, Bermuda, Brazil, Canada and the four listed above. A trader who moved to Dubai or a Binance-linked entity in the Caymans to escape India’s TDS did not necessarily move outside CARF’s reach. Once these jurisdictions’ domestic exchanges start collecting data in 2026, that data is scheduled to land back in New Delhi by 2027, the same year India’s own exchanges start filing.

Reportable Persons Include Foreign Tax Residents

The guidance requires every exchange to sort its customer base into reportable and non-reportable users. Reportable persons include crypto users who are tax residents of a country other than India, plus controlling persons behind certain entity accounts that do not qualify as active businesses or otherwise earn an exemption.

Exchanges must run customer due diligence to establish tax residency, collect KYC and taxpayer information, keep records of covered transactions, and file everything annually on Form 167. A separate rule targets spending rather than trading: a reportable retail payment transaction is a transfer of crypto-assets used to buy goods or services worth more than $50,000, a distinct threshold from the rupee-denominated TDS trigger and aimed squarely at large crypto payments rather than routine trades.

Frequently Asked Questions

Does this guidance create a new crypto tax in India?

No. The flat 30% tax on gains and the 1% TDS on transactions remain exactly as they were. The guidance only tells Reporting Crypto-Asset Service Providers how to collect and file information under Section 509 of the Income-tax Act, 2025; it does not touch tax rates or introduce new liabilities for individual investors.

Does the framework reach crypto held on foreign or decentralized platforms?

Only partly. A foreign exchange has to report an Indian user’s holdings back to India if that exchange operates in a jurisdiction that has committed to CARF, such as the UAE or Singapore. Exchanges based in non-committed jurisdictions, and fully decentralized platforms with no corporate entity to regulate, currently fall outside CARF’s reach.

How is CARF different from the reporting rules banks already follow?

Banks have reported foreign account holders’ details for years under the older bank-account reporting regime it expands, known as the Common Reporting Standard. CARF applies the same automatic-exchange logic to crypto specifically, because crypto assets can move between people without ever touching a bank account the older standard would catch.

What should individual crypto investors expect to change day to day?

Little, procedurally. The filing burden sits with exchanges, not individual taxpayers. But investors should expect their platform to ask for additional documents, such as tax residency proof or a PAN, as part of the due diligence exchanges must now run on every account.

Are NFTs and security tokens covered by the new reporting rules?

Yes, potentially. The CBDT’s definition is functional rather than label-based, meaning cryptocurrency, security tokens and non-fungible tokens can all count as crypto-assets if they represent transferable economic value and are not otherwise excluded, such as by failing to qualify as usable for investment or payment.

Disclaimer: This article explains regulatory guidance for informational purposes only and is not tax or investment advice. Crypto-asset holders should consult a qualified tax professional about their own reporting obligations, and figures cited here are accurate as of publication.