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India Strengthens Crypto Monitoring: CBDT Introduces Standardized Reporting and Detailed Schedule VDA Compliance
India is enhancing oversight of cryptocurrencies within the Virtual Digital Asset (VDA) framework. While the legality of purchasing, selling, and holding crypto remains unchanged, recent regulatory updates focus on the standardized reporting requirements set by the Central Board of Direct Taxes (CBDT) through Form 167, detailed transaction disclosures in Schedule VDA, and stringent anti-money laundering obligations from the Financial Intelligence Unit (FIU-IND).
Standardized Reporting for Crypto (Form 167): The CBDT has instructed crypto exchanges and service providers to annually submit standardized transaction reports using Form 167 as per Section 509 of the Income Tax Act.
Detailed Schedule VDA Reporting: Investors must individually report each VDA transaction in Schedule VDA for income tax filings, instead of using consolidated figures, enabling tax authorities to automatically cross-check exchange data.
Enforcement of Existing Tax Regulations: The 30% flat tax on VDA profits and the 1% Tax Deducted at Source (TDS) on transfers exceeding ₹10,000 remain unchanged. Offsetting trading losses against other income sources remains prohibited.
FIU-IND Registration & PMLA Compliance: All local and registered offshore VDA service providers must adhere to Anti-Money Laundering (AML) standards under the Prevention of Money Laundering Act (PMLA). Harsher penalties are imposed for delayed or inaccurate reporting.
Alignment with Global Standards: India is gearing up for the full adoption of the OECD's Crypto-Asset Reporting Framework (CARF) to facilitate international data sharing on foreign exchange holdings.
Reduction of Underreporting: Automated matching of data between exchanges and tax filings eliminates undisclosed profits or off-the-books transactions.
Higher Compliance Risks: Discrepancies between exchange records and tax declarations now prompt immediate explanations and audits.
Unchanged Tax Rates: Tax rates remain one of the highest globally, impacting both frequent traders and individual investors.
Who is affected
Individual Crypto Investors & Traders: Need to keep detailed records of each transaction, including purchases, sales, swaps, staking rewards, and wallet transfers to comply with Schedule VDA.
Crypto Exchanges & Service Providers: Obliged to establish new compliance mechanisms for handling Form 167 submissions and monitoring transactions for FIU-IND.
Users of Overseas Platforms: Traders using foreign exchanges face heightened exposure as cross-border tracking and CARF implementation expand.