India Shifts Crypto Tax Reporting To CEXs

TLDR

India has formalized new crypto tax reporting rules that shift detailed transaction reporting from individual traders to centralized exchanges.

1. The CBDTs new guidance keeps Indias 30% tax and 1% TDS on crypto but makes exchanges the primary tax reporting entities.
2. Indian-facing CEXs must run stricter KYC, track users tax residency, and report large and cross-border crypto payments under OECD-style information sharing.
3. From 20262027, India will test whether exchange-led reporting improves tax collection, while broader crypto rules and treatment of self-custody remain key open questions.

Deep Dive

1. CBDT Guidance And Scope

Indias Central Board of Direct Taxes (CBDT) has issued a 198 page guidance note that explains how crypto exchanges must report virtual digital asset activity, without changing headline tax rates on crypto income or trades. The note confirms that the 30% flat tax on VDA gains and the 1% tax deducted at source (TDS) still apply, but operational responsibility for reporting now sits with RCASPs (crypto asset service providers) rather than individual traders.

The guidance aligns Indias approach with the OECDs Crypto-Asset Reporting Framework (CARF), specifying that exchanges must collect and report standardized data on their users and transactions, including separate fields for certain large crypto payments and cross border activity. This builds on earlier VDA rules in the Income Tax Act and anti money laundering coverage under the PMLA.

2. Impact On Users And CEXs

Under the new framework, Indian facing centralized exchanges must:

1. Perform KYC and confirm each users tax residency.
2. Report crypto payments above a threshold (for example, around $50,000) when used for goods or services.
3. Flag cross border trades for automatic information exchange with partner countries.

Data collection begins for 2026 trades, with filings such as Form 167 due in 2027 and international data sharing expected from April 2027, according to the CBDT guidance summarised in the CoinsKid community note on Indias VDA rules here.

Investors still have to file Schedule VDA in their own returns and ensure that what they report matches the exchanges data, or risk tax notices. Exchanges that serve Indian residents, including global platforms with local users, face higher compliance costs and tighter scrutiny of KYC and reporting quality.

3. What To Watch Next

The guidance note highlights that Indias crypto rules are still fragmented across tax law, AML rules, securities treatment and GST, and that the Finance Ministry, SEBI and RBI are working on a more unified framework. A Standing Committee on Finance report on VDAs is expected in an upcoming Parliamentary session, which could recommend broader reforms.

Key future signals include: how strictly authorities enforce mismatches between exchange data and user filings; whether offshore and non compliant platforms lose Indian access; and whether later rules explicitly cover self custodial wallets and multi platform trading, which today remain harder to track. The CARF style model makes India part of a global information exchange network, so cross border tax transparency for crypto will likely increase from 2027 onward.

Conclusion

Indias move to put crypto tax reporting on centralized exchanges clarifies who must build the reporting pipes, without changing the underlying tax bite on crypto gains. For users, the practical shift is toward heavier KYC and more structured transaction records, while for exchanges, compliance and data accuracy become core obligations. The real test will be 20262027, when these rules start operating in practice and India decides how far to extend them across self custody, offshore platforms and a future unified crypto framework.