CBDT’s RCASP framework: New crypto reporting rules to boost tax compliance, tighten scrutiny of transactions
Annual reporting cycle for crypto exchanges
According to Punit Agarwal, Founder & CEO of KoinX, the new framework establishes a uniform set of reporting obligations for all Reporting Crypto-Asset Service Providers (RCASPs).
“RCASPs now have a defined obligation under Section 509 of the Income-tax Act, 2025. Exchanges have to identify reportable users, verify their tax residency, and file annual reports containing reportable crypto transactions with the tax department in a prescribed format,” Agarwal said.
The reporting will cover transactions undertaken during the 2026 calendar year, with the first reports due in 2027. Unlike real-time reporting, the framework follows a structured annual filing cycle.
He noted that India previously lacked a standardized CARF-style reporting system for crypto transactions. The new guidance creates a common compliance framework and provides exchanges with a uniform rulebook.
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Stronger due diligence requirements
A major operational change for exchanges is the expanded customer due diligence process.
While crypto platforms already conduct Know Your Customer (KYC) checks during onboarding, the new framework requires exchanges to determine and periodically verify the tax residency of every reportable user.
“The biggest change is when verification happens,” Agarwal explained. “Platforms will need to re-verify existing users’ KYC and residency status instead of focusing only on new customers.”
For exchanges that have already invested in compliance infrastructure, the framework validates existing practices. Others will now need to upgrade their systems to meet mandatory requirements.
What exchanges must report
Through Form 167, exchanges will be required to report a user’s identity, KYC details, tax residency information and reportable crypto transactions carried out during the year.
The information mirrors international CARF standards by consolidating identity, residency and transaction data into a single annual filing submitted to tax authorities.
Penalties for non-compliance
The Income-tax Act, 2025 also introduces financial penalties for exchanges that fail to comply.
According to Agarwal, failure to file the required reports can attract a daily penalty of Rs 200 until the return is furnished, while inaccurate or incomplete reporting may result in a penalty of up to Rs 50,000.
“The intent is clear: this isn’t optional paperwork; it’s now backed by real financial consequences,” he said.
What it means for crypto investors
For individual investors, the framework does not introduce any additional reporting forms or filing obligations.
However, Agarwal believes it will significantly reduce opportunities for inconsistent reporting.
“This is squarely an exchange-side compliance requirement. It doesn’t create a new investor-facing filing, but it does reduce the scope for mismatches and under-reporting,” he said.
He expects tax scrutiny to become more targeted once exchanges begin submitting standardized transaction data. Currently, authorities primarily rely on TDS data while matching tax returns. The RCASP framework will enable far more precise reconciliation of crypto transactions.
Investors are therefore advised to maintain complete exchange statements, wallet transaction histories and TDS certificates, and reconcile them with their Annual Information Statement (AIS) before filing their income tax returns.
Agarwal cautioned that discrepancies between exchange-reported information and tax returns could trigger automated tax notices more quickly than before. “The solution is straightforward—reconcile your records with what your exchange has reported before filing, rather than after receiving a notice,” he said.
