Currently, India neither recognises cryptocurrencies as legal tender nor prohibits their use. However, transactions are taxed under the VDA regime, with a 1 per cent Tax Deducted at Source (TDS) on specified transactions and a flat 30 per cent tax on gains.
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The Central Board of Direct Taxes (CBDT) has issued a comprehensive guidance note laying down reporting obligations for crypto exchanges and other intermediaries, marking a significant step towards bringing virtual digital asset (VDA) transactions under a more structured tax reporting framework.The move comes shortly after the Parliamentary Standing Committee on Finance urged the government to examine the need for a statutory and regulatory framework for VDAs. While the guidance does not alter the existing tax regime for cryptocurrencies, experts say it will substantially improve transparency and give tax authorities greater visibility into crypto transactions.The 198-page guidance note details the obligations of Reporting Crypto-Asset Service Providers (RCASPs), including crypto exchanges and other intermediaries, covering the scope of reportable crypto-assets, identification of reportable persons, due diligence requirements and the procedure for filing reports. “It seeks to explain, in a simple and practical manner, the obligations of Reporting Crypto-Asset Service Providers under the framework,” CBDT Member Prasenjit Singh said in the introductory note.Currently, India neither recognises cryptocurrencies as legal tender nor prohibits their use. However, transactions are taxed under the VDA regime, with a 1 per cent Tax Deducted at Source (TDS) on specified transactions and a flat 30 per cent tax on gains. The VDA framework also covers non-fungible tokens (NFTs) and similar digital assets, but excludes the Reserve Bank of India’s Central Bank Digital Currency (CBDC). The new guidance does not change these provisions but standardises how information must be reported.‘Enhances transparency’Tax experts say the framework rests on four key pillars. It aims to enhance transparency by bringing crypto transactions within a structured reporting system similar to the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). It also seeks to bridge the information gap created by crypto-assets operating outside the conventional financial system, giving tax authorities better visibility into transactions.The guidance also aligns India’s reporting framework with the OECD’s international standards, facilitating cross-border exchange of information on crypto transactions. At the same time, experts stressed that the document is procedural and does not introduce any new tax or modify the existing taxation framework.“This development is less about imposing additional taxes and more about ensuring that crypto transactions become part of a robust and transparent tax reporting ecosystem,” said Amit Agarwal, Senior Partner at Nangia & Co LLP.Although the guidance is primarily directed at crypto exchanges and other service providers, experts said individual investors should expect greater scrutiny as tax authorities gain access to transaction-level information. They advised taxpayers to continue reporting crypto income accurately, maintain detailed records of purchases, sales, transfers and wallet movements, preserve exchange statements and ensure that disclosures in income tax returns match the information available with exchanges.“While there is no additional filing requirement for taxpayers under this Guidance Note, the importance of accurate reporting and documentation has increased considerably because the tax authorities will have greater access to transaction-level information,” Agarwal said.Published on July 26, 2026
