India Expands Tax Reporting to Include Crypto and CBDCs

The updated guidance forces banks, insurance providers, custodians, and mutual funds to integrate these digital assets into their existing FATCA and Common Reporting Standard frameworks. Institutions must now verify tax residency and report financial data for these products as part of India’s commitment to the Automatic Exchange of Information. Beyond the expanded scope, the regulator introduced stricter due diligence for high-value accounts, requiring enhanced reviews for any holdings exceeding $1 million before they are classified for international reporting.

This shift follows a series of regulatory efforts to tighten control over decentralized finance. Authorities remain concerned that offshore exchanges and private wallets facilitate tax evasion, noting that less than a quarter of the 645,000 individuals who traded crypto in the 2023 fiscal year reported those gains. While the Reserve Bank of India continues to advocate for keeping private stablecoins outside the formal financial system, the government is opting for a strategy of rigorous tax enforcement and anti-money laundering compliance to monitor the sector.