Source: ET
Context:
The Government of India has expanded the financial account reporting framework to include crypto assets, Central Bank Digital Currencies (CBDCs), and certain electronic money products. The move aims to strengthen tax transparency and international information sharing.
The changes were notified by the Central Board of Direct Taxes (CBDT) through the Income-tax (Amendment) Rules, 2026.
Key Changes in the Rules
The amendments modify Rules 114F, 114G, and 114H of the Income-tax Rules, which deal with due diligence and reporting requirements for financial institutions.
New Financial Assets Included
Financial institutions must now report accounts involving:
- Crypto assets
- Central Bank Digital Currencies (CBDCs)
- Specified electronic money products
These assets will now fall under the tax information-sharing framework.
Definition of Relevant Crypto Assets
The rules define a relevant crypto asset as:
- Any crypto asset used for payment or investment purposes
- Excludes CBDCs and specified electronic money products
Examples may include cryptocurrencies used for trading, investment, or transactions.
Specified Electronic Money Products
The rules introduce a new category called specified electronic money products, defined as:
- Digital representations of fiat currency
- Issued after receiving funds
- Redeemable at face value
- Used for payment transactions
This includes certain digital wallets or prepaid digital money instruments.
Alignment with Global Tax Transparency Frameworks
The amendments align India’s system with global standards such as:
1. FATCA (Foreign Account Tax Compliance Act)
- A U.S. law requiring disclosure of financial accounts held by U.S. taxpayers abroad.
2. CRS (Common Reporting Standard)
- Developed by the Organisation for Economic Co-operation and Development (OECD).
- Enables automatic exchange of financial account information between countries.
3. CARF (Crypto-Asset Reporting Framework)
- An OECD framework specifically designed to track and report crypto-asset transactions across borders.
Exemptions for Low-Value Accounts
Some low-value accounts are exempt from reporting requirements.
Example:
- Electronic money accounts with a balance below $10,000 (rolling 90-day average) may not require reporting.
