New Delhi: The Central Board of Direct Taxes (CBDT) on Friday notified amendments to the Income-tax Rules, expanding the financial account reporting framework with effect from January 1 to include crypto-assets, central bank digital currencies (CBDCs) and certain electronic money products.
The definition of ‘financial assets’ has been expanded to formally include CBDCs and various electronic money products, along with interest from crypto and crypto related assets, marking a shift toward more comprehensive tax compliance for digital assets.
All crypto-asset service providers and certain financial institutions will now be required to report transactions and holdings involving such assets to tax authorities.
The definition of ‘depository institutions’ has been amended to include accounts representing electronic money products or those holding CBDC, and accounts holding CBDC on behalf of customers will be treated similarly to deposit accounts in specific cases.
The new rules mandate banks and depositories to track holdings, joint accounts and controlling persons with far greater detail than before.
The changes also introduce new conditions for accounts linked to company formation or capital increases, excluding for certain depository accounts with year-end balances below $10,000.
Financial institutions must now maintain valid self-certifications and collect taxpayer identification numbers and dates of birth in line with the Prevention of Money-Laundering Act, 2002.
This applies to both existing and new accounts, and covers joint account details, controlling persons, equity interests and account types for accounts exceeding $10,000.
These rules apply only to non-US accounts-that is, accounts held by residents outside the United States or those not covered under the Foreign Account Tax Compliance Act.
