CBDT's new crypto reporting framework explained: What CARF means for crypto exchanges and investors

The Central Board of Direct Taxes (CBDT) has issued a 198-page guidance note to operationalise the Crypto-Asset Reporting Framework (CARF), a global tax transparency system for reporting crypto transactions. The guidance lays down detailed reporting and due diligence obligations for crypto exchanges and other Reporting Crypto-Asset Service Providers (RCASPs), with the aim of bridging the information gap created by crypto assets that can be held or transferred outside the traditional financial system.

While the guidance is procedural in nature, it marks an important step in aligning India's crypto reporting regime with international standards. Here's what the framework means for exchanges and investors.

What is CARF?

Developed by the Organisation for Economic Co-operation and Development (OECD) along with G20 countries, CARF is a global framework designed to improve tax transparency for crypto assets. Unlike traditional financial assets held through banks, crypto assets can be transferred across borders with limited regulatory visibility, making it difficult for tax authorities to track transactions.

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CARF works much like the Common Reporting Standard (CRS), which enables countries to automatically exchange information on offshore financial accounts. Under CARF, crypto exchanges and other reporting crypto-asset service providers will collect information on users and their crypto transactions and report it to domestic tax authorities, which can then automatically exchange that information with other participating jurisdictions. India has adopted the framework through the Income-tax Act, 2025.

What are the new reporting requirements?

According to CoinSwitch Co-founder Vimal Sagar Tiwari, the framework introduces a standardised reporting system under which RCASPs must identify reportable users, determine their tax residency, conduct prescribed due diligence and report specified crypto transactions through Form 167. Exchanges will need to build systems capable of collecting, verifying and reporting tax-relevant information consistently.

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Mudrex CEO Edul Patel said exchanges will also be required to collect prescribed KYC and taxpayer information, maintain records of reportable transactions and file annual reports with the Income Tax Department through Form 167. Certain qualifying retail payment transactions involving crypto assets will also have to be reported.

How will customer due diligence change?

The guidance expands compliance obligations beyond conventional KYC and anti-money laundering checks.

Tiwari said exchanges will now need to collect tax self-certifications, validate customer information and identify controlling persons in certain entity structures. The emphasis shifts from simply verifying identity to ensuring that information supporting regulatory reporting is complete, accurate and capable of withstanding scrutiny.

Patel added that exchanges will move towards an ongoing compliance model by continuously determining users' tax residency, classifying transactions under reporting rules and maintaining updated records, bringing crypto platforms closer to compliance standards followed by banks and other financial institutions.

Aspect	Before CARF	Under CARF
Reporting framework	No standardised global reporting framework for crypto transactions	Standardised reporting under the OECD's Crypto-Asset Reporting Framework (CARF)
Who must comply?	Existing KYC and regulatory requirements for crypto exchanges	Reporting Crypto-Asset Service Providers (RCASPs), including crypto exchanges, must meet CARF reporting and due diligence obligations
Customer due diligence	Primarily identity verification and AML/KYC checks	Additional tax due diligence, including tax residency, self-certifications and validation of customer information
Information collected	Basic KYC and transaction records	Customer identity, tax residency and reportable crypto transaction details through Form 167
Reporting to tax authorities	No dedicated CARF reporting	Annual reporting of specified crypto transactions through Form 167
Cross-border information sharing	Limited	Information can be exchanged automatically among participating CARF jurisdictions
Investor impact	Existing tax reporting obligations	No new tax or filing requirements, but greater transparency as exchanges report transaction-level data
Record-keeping for investors	Recommended	Increasingly important to reconcile exchange records with tax returns and maintain supporting documents
Penalties for exchanges	Existing compliance provisions	₹200 per day for failure to furnish prescribed statements and ₹50,000 for inaccurate information that is not corrected

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What happens if exchanges fail to comply?

The reporting obligations are backed by statutory penalties. Tiwari noted that Section 446 of the Income-tax Act, 2025, provides penalties where an RCASP fails to furnish prescribed information or submits inaccurate information, making compliance a governance priority.

Patel added that failure to furnish the prescribed statement can attract a penalty of ₹200 per day, while furnishing inaccurate information that is not corrected may invite a ₹50,000 penalty under the Income-tax Act, 2025.

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What does this mean for crypto investors?

The guidance note does not introduce any new tax or filing obligation for individual investors. However, because exchanges will now report transaction-level information, tax authorities will have greater visibility into crypto transactions.

Both CoinSwitch and Mudrex said investors should maintain complete records of purchases, sales, transfers between wallets and exchange statements, reconcile them with exchange records before filing tax returns and ensure their disclosures accurately reflect their crypto income. While the guidance does not state that every mismatch will automatically trigger a tax notice, significant discrepancies between exchange-reported information and an investor's tax return could invite further verification by the Income Tax Department.