Context
The Central Board of Direct Taxes (CBDT) has issued guidance to implement India’s reporting obligations under the OECD Crypto-Asset Reporting Framework (CARF). The framework enables automatic exchange of crypto-asset transaction information with partner jurisdictions to improve tax transparency and curb tax evasion.
Explanation
- Crypto-assets are digitally represented assets that use Distributed Ledger Technology (DLT), such as blockchain, and include cryptocurrencies and certain digital tokens.
- Service Providers (CASPs), such as crypto exchanges and brokers, must undertake Know Your Customer (KYC), identify reportable users, maintain transaction records and submit prescribed information to tax authorities.
- India has adopted CARF through amendments to the Income-tax Act, 1961 and the Income-tax Rules, 1962, with CBDT issuing implementation guidance.
- CARF complements the Common Reporting Standard (CRS) by covering crypto-assets, reducing opportunities for offshore tax evasion and improving cross-border tax transparency through automatic exchange of information (AEOI).
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