India has formally committed to adopting the Crypto-Asset Reporting Framework (CARF) by 2027. The move aims to improve transparency in cryptocurrency transactions and curb tax evasion, especially those involving offshore crypto platforms. Starting April 1, 2026, Indian crypto exchanges will be required to report user data and transactions under a new clause introduced in the Income Tax Act.
What Is CARF?
CARF is a global reporting standard introduced by the Organisation for Economic Co-operation and Development (OECD) to bring greater oversight to crypto transactions. Much like the Common Reporting Standard (CRS) does for financial institutions, CARF compels Crypto Asset Service Providers (CASPs)—like exchanges and wallet operators—to collect and share user data with tax authorities.
Under CARF, platforms will report details like:
- User identity and tax residency
- Annual transaction volumes
- Transfers involving crypto and fiat
This framework was endorsed by the G20 under India’s presidency and is now being implemented in over 50 jurisdictions.
Why India Is Moving Fast on CARF
1. Tackling Offshore Crypto Activity
A growing number of Indian investors trade on foreign crypto platforms to avoid domestic taxes, including the 1% TDS. With CARF, authorities will gain visibility into these offshore holdings through automatic data exchange.
2. Leveling the Playing Field
Domestic crypto exchanges face stricter regulations than their international counterparts. CARF will bring parity by ensuring global platforms are also accountable for Indian users’ activity.
3. Safeguarding Fiscal Interests
By increasing the scope of surveillance and reporting, CARF will reinforce India’s fiscal sovereignty and prevent tax base erosion caused by crypto anonymity and cross-border trading.
Timeline and Legal Changes
India’s 2025 Union Budget introduced Section 285BAA in the Income Tax Act. This mandates registered Indian crypto platforms to begin compliance reporting by April 1, 2026. The first international exchange of data under CARF is expected by 2027, once technical systems and international coordination are in place.
Global Alignment and India’s Commitment
India is among the early adopters of CARF, joining a coalition of 52 countries pledging to roll out the framework by 2027. This aligns India with global best practices for crypto governance and demonstrates its commitment to curbing illicit financial flows.
The G20 consensus during India’s presidency played a crucial role in shaping the adoption roadmap and encouraging widespread participation.
Policy Implications and Next Steps
- Domestic Preparation: Regulatory bodies like the CBDT and SEBI must develop infrastructure for data collection, validation, and risk analysis.
- Clarity for Exchanges: The government is expected to release detailed guidelines to help CASPs comply with the new provisions.
- Awareness Campaigns: Investors and institutions must be educated on how CARF affects tax reporting and asset disclosures.
Impacts on Investors and Platforms
| Aspect | Expected Change |
|---|---|
| Offshore trading | Transactions on foreign exchanges will be reported to Indian authorities |
| Compliance | Domestic platforms must collect and report user data starting FY 2026–27 |
| Investor scrutiny | High-value and suspicious crypto transactions may attract audits |
| Legal penalties | Non-compliance with CARF mandates could lead to penalties or regulatory action |
Final Thoughts
The implementation of CARF represents a landmark in India’s effort to modernize its tax administration in the face of evolving digital assets. With this framework, the government is signaling zero tolerance for crypto-driven tax evasion and aiming to build a transparent, fair, and globally aligned financial ecosystem.
By setting a firm deadline for CARF adoption, India not only strengthens its tax regime but also sets a precedent for other developing economies navigating the complexities of crypto taxation.
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Amit Sharma is the Content Editor at JurisHour. He has been writing about the Indian legal market. He has covered tax & company litigation stories from the Supreme Court, High Courts and Various Tribunals. Amit graduated from MLSU Law College with B.A.LL.B. and also holds an LL.M. from MLSU, Udaipur, Rajasthan. An Advocate in Taxation, and practised in Tribunals as well as Rajasthan High Court and pursued Masters in Constitutional Law. He started out small with little resources but a big plan to take tax legal education to the remotest locations across India and eventually to the world. His vision is to make tax related legal developments accessible to the masses.
