Income Tax Notifications & Order IT

CBDT Brings Crypto-Assets and Digital Currency Under Income Tax Reporting Framework: Key Changes Explained

CA Adityavikram Banka

The Central Board of Direct Taxes (CBDT) has issued Notification No. 19/2026 (G.S.R. 158(E)) dated March 5, 2026, introducing significant amendments to the Income-tax Rules, 1962. The notification amends Rules 114F, 114G, and 114H to bring crypto-assets, Central Bank Digital Currencies (CBDCs), and specified electronic money products within the scope of India’s tax reporting framework.

These changes, effective from January 1, 2026, are a major step in aligning India’s financial reporting standards with global norms for digital asset monitoring.

Background and Legal Basis

The amendments were notified under Sections 295 and 285BA of the Income-tax Act, 1961. They expand the scope of reportable financial accounts and align India’s reporting framework with emerging international standards, particularly the OECD’s Crypto-Asset Reporting Framework (CARF).

With the growing adoption of crypto-assets and digital currencies worldwide, regulators have recognized the need to enhance transparency and information exchange. These amendments represent India’s commitment to international cooperation on tax administration relating to digital assets.

Key Amendments to Rule 114F: Expanded Definitions

Rule 114F has been significantly expanded to include new definitions and provisions:

  • Central Bank Digital Currency (CBDC): Defined as any digital fiat currency issued by a central bank. In India’s context, this covers the e-Rupee (Digital Rupee) issued by the Reserve Bank of India.
  • Specified Electronic Money Product: A digital representation of fiat currency issued upon receipt of funds and redeemable at par value, which may be used for payment transactions.
  • Relevant Crypto-Assets: The term financial asset under Rule 114F(2) now includes any interest in a relevant crypto-asset, including derivatives such as futures, forward contracts, or options linked to such assets.
  • Expanded Depository Account Definition: The definition of depository account now includes accounts representing electronic money products or accounts holding CBDCs on behalf of customers.

Rule 114G Amendments: Enhanced Reporting Obligations

The amendments introduce new reporting requirements under Rule 114G:

  • New Sub-rule 114G(1)(fa): Financial institutions must now report the role through which a reportable person holds an equity interest in an investment entity structured as a legal arrangement (e.g., trusts or similar structures).
  • Self-Certification Reporting: Institutions must report whether the account holder has provided a valid self-certification.
  • Joint Account Disclosure: Reporting now includes whether the account is a joint account and the number of joint account holders.

Rule 114H Amendments: Due Diligence Procedures

Amendments to Rule 114H revise the due diligence procedures applicable to financial institutions:

  • Revised timelines for identifying reportable accounts
  • Provision to use pre-existing account procedures where self-certification cannot be obtained immediately
  • Enhanced procedures for new accounts involving digital assets

Practical Implications

For Financial Institutions and Banks

Banks and other reporting financial institutions will need to upgrade their compliance systems to collect and report detailed information on account holders dealing in crypto-assets, CBDCs, and electronic money products. This includes updating KYC processes and reporting mechanisms.

For Crypto Investors and Traders

Individual and institutional investors in crypto-assets should be aware that their transactions will now be reported by financial institutions to the Income Tax Department. Maintaining proper records of all crypto transactions is now more important than ever.

For Startups and Fintech Companies

Startups operating in the crypto and digital payments space must ensure their platforms comply with the enhanced reporting requirements. Companies offering CBDC wallets or electronic money products will need to implement the required due diligence and reporting procedures.

For CA Professionals

Chartered Accountants advising clients with crypto holdings should familiarize themselves with the updated Rules 114F, 114G, and 114H. Clients will need guidance on the compliance implications and proper record-keeping for digital assets.

Key Takeaways

  1. Crypto-assets, CBDCs, and electronic money products are now formally within the scope of India’s tax reporting framework.
  2. Financial institutions face expanded reporting and due diligence obligations effective January 1, 2026.
  3. The amendments align India with the OECD’s global standards for digital asset reporting.
  4. Information exchange regarding crypto-asset transactions is limited to tax administration purposes.
  5. All stakeholders dealing with digital assets should review their compliance processes immediately.

Action Items

  • Financial institutions should update their reporting systems and due diligence procedures.
  • Crypto investors should maintain detailed records of all transactions.
  • CA professionals should advise clients on the new compliance requirements.
  • Fintech companies should review platform compliance with the amended rules.

Source: CBDT Notification No. 19/2026, G.S.R. 158(E), dated March 5, 2026

Need expert guidance on crypto-asset compliance and tax reporting? Our team specializes in helping businesses and individuals navigate complex regulatory requirements. Book a free consultation call today.

Disclaimer: This article is for informational purposes only and does not constitute legal, tax, or financial advice. Readers are advised to consult a qualified professional before taking any action based on the information provided.

CA Adityavikram Banka
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