India Mandates Crypto Platforms Report Transactions Under OECD Framework
The move of the ministry comes after receiving information on offshore financial transactions of an assessee under the automatic exchange of information that it has entered into with several jurisdictions.
New Delhi: The Central Board of Direct Taxes (CBDT) under the Union finance ministry on Monday has warned that crypto exchanges and other intermediaries will have to report all transactions on their platforms to the income tax (I-T) department. The department further said that it is more procedural in nature, while ensuring that crypto transactions become part of a transparent global-tax reporting ecosystem.
A crypto asset is defined as a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions and includes crypto currencies and cryptography-based tokens. The move of the ministry comes after receiving information on offshore financial transactions of an assessee under the automatic exchange of information that it has entered into with several jurisdictions.
Issuing a guidance note, the I-T department also said that the objective of the note on crypto asset reporting obligations is to bridge the information gap that existed because such assets could be transferred or held outside the traditional financial system. “The note intends to explain the reporting obligations of reporting crypto-asset service providers (RCASP) in line with the crypto-asset reporting framework (CARF) developed jointly by the organisation for economic cooperation and development (OECD) and participating countries, including India.
The CARF is a global tax transparency framework, which provides for the automatic exchange of tax-relevant information on transactions in crypto assets with the jurisdictions of residence of taxpayers on an annual basis. Under income tax laws, RCASPs have to fulfil reporting and due diligence requirements for ‘relevant crypto assets’, which include assets such as Bitcoin, Ether, etc.
RCASP refers to any individual or entity that, as a business, provides a service affecting exchange transactions for or on behalf of customers, including by acting as a counterparty, or as an intermediary, to exchange transactions, or by making available a trading platform.
However, since the crypto currencies are outside the traditional financial system, it has the potential to escape the reporting obligations and hence India's G20 Presidency in 2023 provided further impetus to CARF implementation. As per G20 New Delhi declaration, CARF information exchange will start by 2027.
