Overview
- The Central Board of Direct Taxes published a 198-page guidance note on July 26–27 that explains how Reporting Crypto-Asset Service Providers (RCASPs) must comply with Section 509 and Rules 241–244 using Form 167.
- The rules require RCASPs to collect and verify users' tax residency, taxpayer IDs and KYC, keep transaction and wallet records (reported retention about seven years), and submit annual transaction reports to the Income Tax Department.
- CARF will apply to reportable crypto transactions from calendar year 2026, with exchanges filing annual disclosures by May 31 of the following year and India set to begin international information exchange under the CARF timetable next financial year.
- The guidance is strictly a tax-reporting measure that does not impose new taxes or decide the legality of crypto, but it significantly increases tax authorities' ability to detect cross-border underreporting and evasion.
- Exchanges and industry groups broadly welcomed the clarity but warned of practical hurdles such as linking banking, trading and blockchain records, validating foreign taxpayer IDs and completing due diligence for pre-existing users within a 12-month transition window.