Strengthening India's tax sovereignty in the age of crypto: The case for Swift CARF implementation
ADVERTISEMENT A significant outcome of India's G20 Presidency was the unanimous endorsement of CARF by G20 member nations, as reflected in the New Delhi Leaders' Declaration. The declaration advocated for the swift and coordinated implementation of CARF, recognizing its importance in enhancing tax transparency and combating offshore tax evasion. CARF, developed by the Organisation for Economic Co-operation and Development (OECD) in collaboration with G20 countries, aims to integrate crypto-assets into the framework of automatic tax information exchange between jurisdictions—mirroring the established success of the Common Reporting Standard (CRS) for traditional financial accounts.
India is among the 52 designated 'relevant jurisdictions' that have committed to implementing CARF by the year 2027. In furtherance of this commitment, the Finance Bill 2025 proposes a new section—285BAA— under the Income Tax Act. This proposed section mandates designated reporting entities to furnish comprehensive information regarding crypto-asset transactions. This provision is slated to take effect from April 1, 2026, providing India with sufficient time to develop the necessary institutional mechanisms for participating in the global exchange of tax-relevant crypto-asset data.
This issue transcends mere abstract policy considerations. A recent report in The Economic Times underscored how traders in India are utilizing offshore platforms, such as Binance, to circumvent the 1% Tax Deducted at Source (TDS) obligation, with these platforms currently under scrutiny by the Income Tax Department. Such regulatory defiance undermines the nation's fiscal discipline, distorts fair market competition, and exposes investors to unmitigated risks. This situation clearly indicates that crypto-asset transactions must be transparent, traceable, and subject to taxation under Indian law.CARF provides the requisite legal and technical infrastructure to dispel the notion that offshore platforms can operate beyond the purview of Indian regulations. It mandates that crypto-asset service providers, particularly those serving users across international borders, must collect and report detailed identification and transaction data. This information will subsequently be shared with the tax authorities in the users' country of residence. For Indian users, this implies that their foreign crypto-asset activities will no longer remain undisclosed to Indian tax authorities.The government's proactive stance on strengthening compliance obligations within the Virtual Digital Asset (VDA) ecosystem is a commendable measure. It is now imperative to equip enforcement agencies with robust monitoring infrastructure and, where necessary, restrict access to non-compliant platforms. Any entity
ADVERTISEMENT seeking to serve Indian users must operate within the established framework of Indian regulations. The privilege of benefiting from India's markets entails a corresponding responsibility to adhere to its laws.As India progresses toward the implementation of CARF, the primary focus must now shift to effective execution through the promulgation of clear rules, the establishment of technological readiness, and the rigorous enforcement of regulations. This juncture presents an opportunity to institutionalize transparency within a domain that has long been characterized by opacity.
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(The author Shri G M Harish Balayogi, is Honourable MP from Amalapuram Lok Sabha Seat (18th Lok Sabha) and TDP Parliamentary Whip)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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