India tightens tax norms for crypto assets

In a significant move to enhance tax compliance in the digital asset sector, the Central Board of Direct Taxes (CBDT) in India has amended the Income-tax Rules to include cryptocurrencies, central bank digital currencies (CBDCs), and electronic money products under the financial account reporting framework. Effective from January 1, these amendments expand the definition of 'financial assets' to encompass these digital assets, thereby obligating crypto-asset service providers and select financial institutions to report transactions and holdings to tax authorities. The revised rules also redefine 'depository institutions' to incorporate accounts linked to electronic money and CBDCs, treating them similarly to conventional deposit accounts in specific scenarios. As part of these changes, banks and depositories are required to closely monitor account details, including joint accounts and controlling persons, with enhanced scrutiny. Furthermore, new regulations stipulate that financial institutions must obtain valid self-certifications and collect taxpayer identification information for both existing and new accounts, particularly those with balances exceeding $10,000. These regulatory updates are aimed at ensuring greater transparency and compliance in the burgeoning digital asset market, which is increasingly attracting regulatory attention amid concerns over money laundering and tax evasion.