India's Crypto Tax Shift: A Global Game of Transparency and Compliance

India’s crypto tax framework is undergoing a significant transformation as the government aligns its policies with the Organisation for Economic Co-operation and Development (OECD) standards. The adoption of the OECD’s Crypto-Asset Reporting Framework (CARF) will bring greater transparency to offshore crypto transactions, targeting residents with international virtual asset holdings. The move is part of a broader international initiative to combat tax evasion and ensure consistent tax compliance across jurisdictions.

Under the new framework, India is set to sign the Multilateral Competent Authority Agreement (MCAA) in the near future, a cornerstone of the OECD’s global data-sharing mechanism. This agreement will facilitate the automatic exchange of tax-related information with other signatory nations. The MCAA will specifically address crypto assets, which, unlike traditional financial instruments, require a distinct reporting mechanism due to their decentralized and cross-border nature. While India has already participated in the MCAA for conventional bank account information since 2015, the CARF is a separate and necessary agreement to address the unique challenges posed by digital assets.

The government has outlined a timeline for legislative amendments to ensure the framework’s implementation is completed by April 2027. These amendments will cover key areas such as data-sharing protocols, reporting standards, and enforcement mechanisms. The adoption of the OECD framework is expected to expand India’s tax net, particularly in capturing income derived from offshore crypto transactions. The CARF will require Indian residents to report all virtual assets held abroad, irrespective of their value, a departure from existing thresholds for conventional financial reporting.

India’s decision to align with OECD standards follows years of criticism over its approach to crypto taxation. Despite the industry’s rapid growth, the country has maintained a conservative regulatory stance, marked by a 30% flat tax on crypto gains, a 1% tax deduction at source (TDS), and an 18% service tax on exchanges. These policies have been cited as a key reason for the migration of crypto traders and firms to more crypto-friendly jurisdictions such as the UAE. The new OECD-aligned reporting rules represent a shift toward international cooperation, but they also underscore the government’s focus on taxation over regulatory clarity.

The OECD’s CARF framework is gaining global traction, with 48 countries, including the U.S., the UK, Germany, and Japan, having already signed on. South Korea is also moving toward implementation, with its Ministry of Strategy and Finance confirming administrative regulations for CARF this year. The country plans to begin its first data exchange cycle in 2027, with the National Tax Service collecting and reporting virtual asset transaction data from both domestic and international exchanges. This trend reflects a growing consensus among OECD members to harmonize digital asset reporting standards and reduce the risks of tax evasion in the crypto sector.

India’s move to adopt the CARF framework signals a broader shift in the global approach to crypto taxation. While the immediate impact will be felt by Indian residents with offshore crypto holdings, the long-term implications could extend to other jurisdictions as more countries align with OECD guidelines. The initiative underscores the increasing importance of international collaboration in managing the tax challenges posed by digital assets. As implementation approaches, stakeholders will be watching closely to see how the policy affects India’s crypto ecosystem and whether it leads to a more balanced regulatory environment.

Source:

[1] India To Introduce New Crypto Tax Reporting Rules Under ... (https://www.ccn.com/news/crypto/india-introduce-crypto-tax-reporting-oecds-guidelines/)

[2] South Korea to exchange virtual asset data under OECD framework (https://cryptorank.io/news/feed/9ddef-south-korea-join-oecds-framework)