In September 2025, India’s Central Board of Direct Taxes (CBDT) confirmed its alignment with the OECD’s Crypto-Asset Reporting Framework (CARF), signaling a major step in monitoring offshore cryptocurrency holdings. Announced during G20 discussions in Johannesburg on September 2, 2025, this decision places India among 67 jurisdictions pledging CARF implementation by 2028, with domestic enforcement set to begin April 1, 2027. For Indian tax authorities, CARF provides unprecedented access to transaction data from foreign exchanges, enabling retrospective audits that could uncover undeclared assets worth billions. This builds on India’s stringent Virtual Digital Assets (VDA) regime, reinforcing efforts to curb tax evasion amid widespread adoption, as India topped Chainalysis’ 2025 Global Crypto Adoption Index with 861 million users engaging in on-chain activities.
India’s Existing Crypto Taxation Landscape
India’s Virtual Digital Assets (VDA) framework, introduced via the Finance Act 2022, covers cryptocurrencies, NFTs, and tokenized assets under Section 2(47A) of the Income Tax Act, 1961. This legislation provides a structured approach for taxing digital assets while ensuring regulatory oversight.
Taxation of VDAs
Gains from VDA transfers, including sales, swaps, or expenditures, are taxed at a flat 30% plus 4% cess, resulting in an effective rate of 31.2% for most taxpayers. Surcharges can increase this rate to 42.7% for incomes exceeding ₹50 crore. Notably, losses from VDAs cannot be offset or carried forward, and these rules were reaffirmed in the Interim Budget 2025.
Transaction Reporting and TDS
Transactions above certain thresholds are subject to tax deduction at source (TDS). For most individuals, this applies to transactions exceeding ₹50,000 annually, while for certain specified individuals without business income, the threshold is ₹10,000. Exchanges such as CoinDCX and WazirX automatically deduct and remit TDS via Form 26Q on a quarterly basis, whereas peer-to-peer or foreign platform users are required to remit it through Challan 281. In FY 2024-25, TDS collections totaled ₹3,562 crore.
Additionally, a GST of 18% applies to platform fees, not VDAs themselves, generating ₹1,200 crore in crypto services revenue.
Reporting Requirements and Compliance
VDAs must be reported through Schedule VDA in ITR-2 or ITR-3, detailing acquisition dates, quantities, costs, and sale values. Reporting deadlines for FY 2024-25 were July 31 or October 31, 2025. Non-compliance can result in penalties of up to 200% of evaded tax or seven years’ imprisonment under the Black Money Act.
Further, VDA service providers (VDASPs) are obligated to submit Suspicious Transaction Reports (STRs) under the Prevention of Money Laundering Act (PMLA) within seven days of identifying suspicious activity.
Decoding CARF: The OECD’s Framework for Cross-Border Crypto Oversight
Finalized by the OECD in October 2022 under G20 mandates, CARF requires annual automatic exchange of crypto-asset transaction data to combat cross-border tax evasion. Unlike the Common Reporting Standard (CRS), CARF targets crypto-assets, including stablecoins, tokenized securities, and certain NFTs, and excludes closed-loop systems like CBDCs unless tradable. Participating jurisdictions must enact domestic laws for due diligence and reporting, facilitated by the Multilateral Competent Authority Agreement (MCAA). As of October 2, 2025, 52 jurisdictions, including India, committed to first exchanges by 2027. CARF’s XML schema, updated in August 2025, standardizes data formats for efficiency, drawing from CRS 2.0 digital asset integration.
Entities Obligated to Report Under CARF
In India, Reporting Crypto-Asset Service Providers (RCASPs) encompass centralized exchanges, brokers, dealers, and wallet providers facilitating Reportable Transactions, such as fiat-to-crypto exchanges, crypto-to-crypto swaps, and transfers exceeding €50,000 annually. DeFi protocols or NFT marketplaces qualify if they custody or control assets. Exemptions include low-risk entities such as governmental bodies or publicly traded firms. VDASPs registered with FIU-IND, numbering 47 as of September 2025, must comply, including foreign providers serving Indian residents. Reportable Users include individuals and entities with tax residency in participating jurisdictions, identified through self-certifications or indicia like addresses, targeting an estimated 30 million offshore crypto holders in India.
Core Compliance Requirements
RCASPs must implement due diligence by January 1, 2027, verifying user residencies via KYC documents, PAN, and address proofs, with enhanced checks for accounts over €1 million. Annual reporting occurs by May 31, covering the previous year, including transaction aggregates, fair market values, and wallet addresses. Integration with existing systems involves Form 26QF expansions, and non-compliance carries penalties mirroring PMLA fines of ₹10,000–1 lakh per instance. The CBDT finalized these rules on September 8, 2025, emphasizing real-time reporting for high-value trades exceeding ₹10 lakh.
The Importance of TIN Validation, Ongoing Due Diligence, and Advanced Compliance Tools
Accurate Taxpayer Identification Number (TIN) reporting is central to CARF compliance in India. Invalid or missing TINs can result in reporting errors, penalties, and challenges in cross-border data exchange. CARF requires Reporting Crypto-Asset Service Providers (RCASPs) and other entities to perform thorough due diligence, verifying TIN syntax, structure, and authenticity across jurisdictions to ensure precise, auditable reporting.
TaxDo offers a comprehensive solution that streamlines TIN verification and continuous account-holder due diligence, helping Indian financial institutions, VDASPs, and offshore platforms maintain full regulatory compliance under CARF.
TIN Verification Made Precise
- Official Global Real-Time TIN Lookup (GTL): Validates TINs directly against official tax authority databases in over 130 countries, providing the highest level of assurance for compliance in India.
- Global TIN Syntax Verification (GSV): Checks TIN format, structure, and checksum across 195+ jurisdictions, ensuring accuracy for both individual and entity accounts where direct authority verification may not be available.
These tools can automate up to 90% of TIN validation workflows, significantly reducing manual errors, operational overhead, and regulatory risk.
Ongoing Account-Holder Due Diligence
CARF emphasizes continuous monitoring of accounts for any changes in ownership, residency, or control. TaxDo’s comprehensive Global Identity Intelligence Engine (GIIE) screens account holders against over 290 official global watchlists, including sanctions, AML, and PEP databases, while also flagging accounts under RBI and CBI scrutiny.
Our advanced due diligence screening features ensure that institutions meet all regulatory requirements. The ongoing screening service automatically alerts compliance teams of any changes in an account holder’s status, enabling timely action and maintaining continuous compliance. This proactive approach allows for early detection of risks and reinforces the accuracy and reliability of reported data.
Unique Comprehensive Compliance for Indian Institutions
By combining advanced global TIN compliance validation with global identity intelligence Engine, TaxDo enables banks, RCASPs, and other financial institutions in India to meet all CARF requirements. With TaxDo, organizations can confidently maintain full regulatory compliance, streamline reporting workflows, and mitigate risk, turning complex obligations into an operational advantage.
Actions by Other Jurisdictions: A Comparative Lens
India’s CARF timeline aligns with peers. The UAE signed the CARF MCAA on July 21, 2025, with implementation in 2027 and public consultations until November 8, 2025. The US deferred reporting for stablecoins to 2026, emphasizing IRS TIN integration. The EU’s DAC8 Directive, effective January 2026, mandates RCASPs to report €600+ transactions, with 27 member states exchanging data bilaterally. Australia and Canada, committing in November 2023, start in 2026 with AUD 10,000 thresholds. Non-committed nations like Russia target 2028. India’s approach mirrors Singapore’s CRS-CARF hybrid, leveraging existing bilateral agreements while adding crypto-specific granularity.
Trading Trends and Market Response in India’s Crypto Space
India’s CARF adoption has generated mixed reactions. Chainalysis’ 2025 report highlights India’s leadership, with Bitcoin and stablecoins dominating 70% of transactions and 69% year-over-year growth in APAC. Experts view CARF as simplifying compliance, potentially increasing institutional inflows by 25%. However, privacy concerns persist, with discussions on X noting potential 15% outflows from privacy-focused users. Post-announcement, crypto trading volumes on WazirX surged 12% in September 2025. Forex sentiment remains stable; the rupee weakened 3.6% against the USD since May 2025, but RBI interventions stabilized it at 87.80, with forex reserves at $629.55 billion as of January 24, 2025.
Conclusion: A Balanced Path to Fiscal Integrity and Innovation
India’s 2027 CARF commitment reinforces its tax sovereignty, bridging domestic VDA rules with OECD standards to capture untaxed offshore flows estimated at ₹5,000 crore annually. For tax professionals and institutions, this requires upgraded TIN validation and reporting systems, while investors must prioritize disclosure to avoid audits. Globally, it supports the G20’s transparency agenda, harmonizing rules for 861 million adopters. Policymakers must calibrate enforcement to sustain India’s crypto growth, projected at $65.8 billion in forex market by 2033, ensuring regulation drives innovation rather than stifling it.