E-Paper
FAQ: Income-tax Rules, 2026: What Users Need to Know
Users must maintain updated KYC and tax information, detailed transaction records.
1. What is changing under the Income-tax Rules, 2026?
The Government of India has released proposals for the Income-tax Rules, 2026, which are proposed to be effective from April 1, 2026, subject to final notification to potentially expand India's implementation of the Common Reporting Standard (CRS) and the US Foreign Account Tax Compliance Act (FATCA). Previously, these frameworks monitored traditional fiat bank accounts and securities.
Industry participants have indicated that such proposals, if implemented, could contribute to increased regulatory clarity. However, the final scope and application will depend on the notified rules.
“The expansion of ‘financial assets’ to include crypto-assets, CBDCs, and digital money instruments is a significant step toward regulatory clarity. By aligning with global frameworks like CARF, India is positioning itself to build a more future-ready crypto ecosystem.” says Nischal Shetty, founder, WazirX.
2. What are “relevant crypto-assets”?
The rules propose to define “relevant crypto-assets broadly to include:
- Cryptocurrencies (e.g., Bitcoin, Ethereum)
- NFTs
- Crypto derivatives (futures, options)
- Central Bank Digital Currencies (CBDCs) like the Digital Rupee
- Certain electronic money products
The exact scope remains subject to final rulemaking and clarification.
3. Will my crypto transactions be reported to tax authorities?
Dilip Chenoy, Chairperson - Bharat Web3 Association says, “Yes, under the new framework, crypto transactions will be systematically reported to tax authorities by exchanges and wallet providers. This goes beyond simple buy and sell activity to include crypto-to-crypto trades and even transfers to self-custody wallets, ensuring there are minimal blind spots in reporting. From an industry perspective, this marks a shift toward full-spectrum visibility of digital asset activity, similar to how traditional financial systems operate today. It also signals that regulators are moving toward data-driven compliance, where mismatches between reported income and transaction activity can be easily identified. For users, this means greater accountability along with more clarity. As India aligns with global standards like CARF, we’re likely to see increased information sharing across jurisdictions over time, making it essential for investors to maintain accurate records and adopt compliant practices from the outset.”
4. What is Form No. 167?
As per (Rule 243(7))">(Rule 243(7)), Form No. 167 is a proposed annual reporting form that crypto platforms may be required to file by May 31 each year.
It captures:
- Total amounts bought/sold
- Number of transactions and units
- Fair market value of trades
- Transfers to external wallets
5. Will TDS (Tax Deducted at Source) still apply?
Yes. The 1% TDS on crypto transactions continues under current law.
However, in certain cases:
- Exchanges may be permitted to discharge to pay the TDS themselves (instead of deducting from users)
- Such transactions will be reported via Form No. 142 (quarterly)
Applicability will depend on final rules and existing provisions of the Income-tax Act.
6. What happens if I use crypto for payments (e.g., buying goods/services)?
As per (Rule 241(12)(b))">(Rule 241(12)(b))If you use crypto for purchases and your total spending exceeds $50,000 (~ ₹40–45 lakh) in a year:
- Your details and transaction data will be reported
- The merchant’s details will also be captured
7. Will KYC and tax residency checks become stricter?
Yes, the rules propose enhanced requirements. KYC and tax residency checks are significantly tightened crypto platforms now must obtain tax residency self-certification and verify it using KYC/AML data at onboarding (Rule 244(2)(a))"> (Rule 244(2)(a)) . They must also revalidate user information upon any change and cannot rely on outdated data (Rule 244(2)(b))">(Rule 244(2)(b)). Additionally, multi-country tax residency and controlling persons must be identified and reported (Rule 243(1)(a)–(c))">(Rule 243(1)(a)–(c)).
In Short the difference in approach is:
Before: Basic identity verification for compliance;
Now: comprehensive financial and tax profiling aligned with global reporting frameworks (e.g., OECD CARF). Platforms will now:
- Collect your tax residency details and Tax Identification Number (TIN)
- Verify this information using IP address, location, and KYC data
- Request updates if your residency status changes
8. How is the value of crypto transactions calculated?
All transactions must be reported in Indian Rupees (INR) using a standard method:
- Exchange’s own INR trading price
- Internal accounting values
- Reliable third-party sources
- Reasonable estimation (if needed)
9. Why are these changes being introduced?
According to Nischal Shetty, “These rules mark a clear shift toward greater transparency and accountability in the digital asset space. India is laying the groundwork for a more credible and globally integrated crypto infrastructure.”
The proposed changes are generally aligned with global efforts to improve tax transparency, subject to official government clarification.
10. What should I do as a user?
Avinash Shekhar, co-founder Pi42 says, “From a compliance standpoint, users need to adopt a far more disciplined approach to their crypto activity. This means ensuring that KYC and tax information is consistently updated, maintaining detailed and auditable records of all transactions, and carefully evaluating the tax impact of each trade, particularly in cases of high frequency or large volumes. With regulatory focus increasing, proactive compliance is no longer optional, but essential.”
Note to readers: This article is part of HT's paid consumer connect initiative and is independently created by the brand. HT assumes no editorial responsibility for the content, including its accuracy, completeness, or any errors or omissions. Readers are advised to verify all information independently.
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