New Reporting Rules for Crypto and Digital Assets

The Income Tax Department has expanded its reporting framework to include transactions in crypto assets and other Virtual Digital Assets (VDAs). This move aims to increase tax transparency and ensure proper reporting of income from these new-age assets, bringing them under greater scrutiny.

What is Being Reported?

Under the new rules, specified reporting entities (such as crypto exchanges and intermediaries) will be obligated to furnish a Statement of Financial Transactions (SFT) detailing crypto-asset transactions. This requirement is outlined in Section 285BAA of the Income-tax Act, 1961 (as introduced by the Finance Act, 2025) and its corresponding provision, Section 509 of the new Income-tax Act, 2025, which becomes effective from April 1, 2026.

Which Assets are Covered?

The reporting covers a wide range of assets defined as VDAs under Section 2(47A) of the Income-tax Act, 1961. This includes:

• Cryptocurrencies (e.g., Bitcoin, Ethereum)
• Non-Fungible Tokens (NFTs)
• Any other information, code, or token providing a digital representation of value

Implications for Taxpayers

This initiative allows tax authorities to cross-verify transaction data with the income declared in tax returns. The Finance Bill, 2026, also proposes significant penalties for reporting entities that fail to comply, highlighting the government's focus on enforcement. Taxpayers must therefore maintain accurate and comprehensive records of all their VDA transactions to ensure full compliance and avoid discrepancies.

For expert guidance on this topic, contact your tax professional today.