Union Budget 2025 brings Crypto Assets under mandatory reporting: What you need to know

The Indian government is taking a significant step towards tax transparency and regulatory oversight in the Virtual Digital Assets (VDAs) sector. The Finance Bill 2025, tabled in Parliament on February 1, proposes amendments to the definition of VDAs and introduces mandatory reporting requirements for crypto-asset transactions.

These changes align India with global efforts to track crypto-asset transactions and ensure tax compliance. The move follows the G20’s endorsement of the OECD’s Crypto-Asset Reporting Framework (CARF), a framework which provides for the reporting and automatic exchange of information in relation to crypto-assets between tax authorities for tax compliance purposes.

For crypto-asset users and businesses, these amendments could have far-reaching implications. It is essential to understand what these changes entail and how they could affect the broader industry.

Let’s break down the amendments and what they mean for you.

The budget proposes to make it mandatory to furnish crypto-asset information. What does it mean for you?

One of the key changes in the Finance Bill, 2025 is the amendment to the definition of Virtual Digital Asset (VDA) and the obligation to furnish information on crypto-assets.

In 2022, clause (47A) was inserted in section 2 of the Income-tax Act, 1961 to define VDA as:

(a) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically;

(b) a non-fungible token or any other token of similar nature, by whatever name called; 

(c) any other digital asset, as the Central Government may, by notification in the Official Gazette specify:

Now, the Financial Bill, 2025 proposes to amend the definition by adding:

(d) any crypto-asset being a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions, whether or not such asset is included in sub-clause (a) or sub-clause (b) or sub-clause (c)

The amendment to bring in crypto-asset in the VDA definition and insertion of new section 285BAA in the Income-tax Act as an obligation to furnish information on transaction of crypto-asset are in alignment to implement the Organisation for Economic Co-operation and Development (OECD)’s Crypto Asset Reporting Framework (CARF) under which India will start sharing the information from 2027 with other jurisdictions. The Bill proposes the amendments to come into effect from April 1, 2026.

Obligation to furnish information on transaction of crypto-asset

The Income Tax Department has published a preliminary set of FAQs on the proposed amendments. For greater clarity to our users we are sharing them below:

Q1: What is cryptoasset? 

Ans: Crypto asset has been defined in sec 2(47A) of the Act under the existing definition of Virtual Digital Asset.

Q2: What are the amendments proposed in Finance Bill 2025 in context of crypto asset?

Ans: It is proposed that prescribed reporting entity shall provide prescribed information in respect of transaction of crypto-asset for such period and in such time and manner to such income tax authority, as prescribed.

Q3: Who will be required to furnish information of crypto asset?

Ans: A reporting entity, as may be prescribed under section 285BAA of the Act will be required to furnish information of cryptoasset.

Q4: What information will be required to be furnished?

Ans:  Information in respect of transaction in crypto asset as may be prescribed under sec 285BAA will be required to be furnished by the Reporting Entity.

Q5: Who is the Reporting Entity?

Ans: Reporting Entity shall be the entity as prescribed in Income-tax Rules in this regard.

Q6: To whom information is to be furnished by the Reporting Entity?

Ans: The information is to be furnished to the Income-tax authority as prescribed in Income-tax Rules in this regard.

Q7: What type of information is proposed to be furnished? 

Ans: Information in respect of transaction of crypto-asset for such period as prescribed in Income-tax Rules in this regard is to be furnished

Q8:  Whether any rules, forms etc. proposed to be prescribed? 

Ans: Yes, rules and forms will be prescribed to furnish prescribed information by the Reporting Entity.

Q9: Why is it being made obligatory to furnish information of crypto asset?

Ans: India has been included in the list of 52 “Relevant” jurisdictions for the purpose of Crypto-Asset Reporting Framework (CARF). CARF provides for the automatic exchange of tax-relevant information (AEOI) on crypto-assets. The G20 Leader’s New Delhi Declaration called for the swift implementation of the CARF. To enable this an amendment is being brought for the prescribed Reporting Entities to furnish information of crypto-asset.

Q10: From when will the reporting entity be required to furnish information of crypto asset?

Ans: The Reporting Entity will have to provide information in respect of transaction in crypto-asset after the prescribed date.

As stated in the FAQs, we will have to wait for the rules and forms to clarify who will be designated as reporting entity, what type of information needs to be shared and in which format. We will keep our users updated as and when there’s further information from the Income-tax Department. As a backgrounder, here’s some more information about CARF.

What is CARF? Why are India and other nations implementing it?

To address the risks posed by crypto-assets with respect to transparency for tax purposes, in June 2023, the OECD, working with G20 countries, completed and published the Crypto-Asset Reporting Framework (CARF). This framework provides for the reporting and automatic exchange of information (AEOI) in relation to crypto-assets between tax authorities for tax compliance purposes. During India’s G20 Presidency, G20 Leaders immediately welcomed the development and invited the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) to support the rapid and widespread implementation of the CARF. Sixty-one jurisdictions have already committed to implement the CARF to start exchanges by 2027 or 2028 at the latest.

India is expected to start exchanging information from 2027. New Delhi will be hosting the Global Forum Plenary meeting later this year where discussions on implementing this global framework is expected to continue.

How does CARF work?

The CARF requires Reporting  Crypto-Asset Service Providers  (RCASPs)  to identify their users and to report on specified transactions, with a view to ensuring the annualised reporting of tax-relevant information concerning certain activities in relation to crypto-assets. 

Once received by tax authorities, the information will be automatically exchanged with the tax authorities of the jurisdiction(s) of residence of the crypto-asset users,  pursuant to an international agreement that provides a legal basis for the automatic exchange of information for tax purposes information required with respect to relevant transactions in respect of each type of relevant crypto-asset.

What’s the information that is reported and exchanged under CARF?

In November 2024, Global Forum published, ‘Delivering Tax Transparency to Crypto-Assets: A Step-by-Step Guide to Understanding and Implementing the Crypto-Asset Reporting Framework’ outlining information that is reported and exchanged under CARF.

The information is:

• information required for the automatic exchange partner jurisdiction to identify the Reportable Person (i.e. the Crypto-Asset User or the Controlling Person of a relevant Entity Crypto-Asset User) concerned (Identification information);
  
• information in relation to the relevant activity that has occurred in connection with the Reportable Person (Transaction information).

Together, this information should be sufficient to identify the Reportable Person and to help establish a picture of the compliance risk of that Reportable Person (i.e. whether they have properly declared the relevant transaction information concerning their crypto-assets or the Crypto Assets of Entities they control).

The following tables set out the information to be reported in greater detail.

Source: Delivering Tax Transparency to Crypto-Assets: A Step-by-Step Guide to Understanding and Implementing the Crypto-Asset Reporting Framework

What does this mean for India’s crypto-asset industry and you?

The CARF which has been developed by G20 and supported by India during its G20 Presidency aims to address the risks posed by crypto-assets with respect to transparency for tax purposes. India has already implemented the Financial Action Task Force standards for digital assets to address the AML/CFT risks. CoinSwitch is a FIU-IND registered platform and is committed to promoting transparency and mitigating risks in the VDA sector. We are also fully compliant with our tax obligations.

For individual investors, these changes mean that their crypto-asset transactions will be more transparent to tax authorities. It also means that compliance with tax obligations becomes more critical than ever.

We will closely track further developments in this space and keep you informed when the Income Tax department finalises the rules/format for crypto-asset reporting.