Crypto Asset Reporting under Income-Tax Act, 2025

Rules, Form 167, Due Date and Penalties

What is Section 509 of the Income-tax Act, 2025?

Section 509 of the Income-tax Act, 2025 introduces a specific information-reporting framework for transactions involving crypto-assets. It requires prescribed reporting entities to furnish details of specified crypto-asset transactions to the Income Tax Department in the prescribed form, manner and time.

Section 509 is primarily a reporting obligation on crypto-asset service providers. It is not the provision under which an individual investor reports his or her crypto income in the Income-tax Return.

The Income-tax Rules, 2026 identify the reporting entities as Reporting Crypto-Asset Service Providers (RCASPs) and prescribe detailed reporting and due-diligence requirements.

Section 285BAA under the 1961 Act vs Section 509 under the 2025 Act

The crypto-asset reporting requirement did not originate solely under the Income-tax Act, 2025. The Finance Act, 2025 had inserted section 285BAA into the Income-tax Act, 1961 with effect from 1 April 2026. The provision is reflected in the Income-tax Act, 2025 as section 509.

What is a crypto-asset for Section 509?

Section 509(6) refers to the definition contained in section 2(111)(d) of the Income-tax Act, 2025. Broadly, the provision covers a crypto-asset representing value digitally and relying on a cryptographically secured distributed ledger or similar technology to validate and secure transactions.

The Income-tax Rules, 2026 use the concept of a relevant crypto-asset and contain detailed definitions for determining which assets, transactions, users and service providers fall within the reporting framework.

The reporting framework covers transactions such as:

• exchange between crypto-assets and fiat currency
• crypto-to-crypto exchanges
• transfers of relevant crypto-assets
• certain retail payment transactions involving crypto-assets and
• certain transfers involving external wallet addresses

Who is required to report under Section 509?

The reporting obligation is imposed on a Reporting Crypto-Asset Service Provider (RCASP).

Under Rule 241, an RCASP broadly includes an individual or entity that, as a business, provides services for effecting crypto-asset exchange transactions for or on behalf of customers.

This may include a business that:

• acts as a counterparty to crypto transactions
• acts as an intermediary
• makes a crypto trading platform available or
• otherwise facilitates covered crypto-asset exchange transactions for customers

Depending on the facts and the prescribed conditions, the framework can therefore cover crypto exchanges, brokers, dealers, market makers and similar businesses facilitating crypto transactions.

When does an RCASP have an Indian reporting obligation?

Rule 242 provides the Indian nexus conditions for determining whether a Reporting Crypto-Asset Service Provider is required to report in India.

An RCASP may fall within the Indian reporting framework where, among other conditions, it:

• is resident for tax purposes in India
• is incorporated or organised under Indian law
• is managed from India
• has a regular place of business in India or
• carries out relevant transactions through a branch located in India

The rules also contain provisions dealing with reporting undertaken in qualifying partner jurisdictions.

Are all Indian crypto investors reported under Section 509?

Not necessarily.

Under Rule 241, a reportable user is a crypto-asset user who is a reportable person. A reportable person is generally an individual or entity that is resident for tax purposes in a country or territory outside India, subject to the exclusions and conditions prescribed in the rules.

Therefore, Form 167 reporting is designed around identifying prescribed reportable users and, where applicable, reportable controlling persons.

This should not be confused with an Indian taxpayer's separate obligation to disclose and pay tax on taxable Virtual Digital Asset (VDA) income in the applicable Income-tax Return.

What information must be reported under Section 509?

Rule 243 prescribes detailed information that an RCASP must report for relevant calendar years beginning on or after 1 January 2026.

User identification information

Information may include:

• name
• address
• country or countries of tax residence
• Taxpayer Identification Number (TIN)
• date of birth
• place of birth, where applicable
• information concerning controlling persons of specified entities and
• details identifying the Reporting Crypto-Asset Service Provider

Crypto transaction information

Therefore, crypto-to-crypto transactions can also fall within the reporting framework even where no rupees or other fiat currency changes hands.

What is Form No. 167?

The Income-tax Rules, 2026 prescribe Form No. 167 for furnishing information relating to crypto-asset transactions under section 509.

The form captures information relating to the Reporting Crypto-Asset Service Provider, reportable users and prescribed crypto-asset transactions.

Due date for Form No. 167

Under Rule 243, Form No. 167 must be furnished by 31 May of the calendar year immediately following the calendar year to which the information relates.

Rule 243 applies to relevant calendar years beginning on or after 1 January 2026. Accordingly, Calendar Year 2026 is the first reporting period, with the corresponding Form 167 due by 31 May 2027.

Nil statement

Where the prescribed due-diligence process does not identify any crypto-asset user or controlling person as a reportable user or reportable person, the RCASP is required to furnish a nil statement in accordance with the prescribed rules.

How is Form 167 furnished?

Rule 243 requires the statement to be furnished electronically to the prescribed income-tax authority through the specified online transmission mechanism and data structure.

An RCASP is also required to provide prescribed details of its designated director and principal officer and obtain the necessary identification for furnishing the statement.

The designated director is responsible for overall compliance with section 509 and the corresponding rules.

Due-diligence requirements under Rule 244

Section 509 reporting is not limited to collecting transaction values. RCASPs are also required to identify the tax residence and reportable status of users.

Rule 244 requires prescribed due diligence, including obtaining a self-certification for determining the user's country or countries of tax residence and checking the reasonableness of that certification based on available information, including applicable AML/KYC documentation.

Individual users

A valid self-certification may include:

• first and last name
• residential address
• country or countries of tax residence
• applicable foreign TIN and
• date of birth

Entity users

Entity users are subject to additional due-diligence requirements, including prescribed rules for identifying relevant controlling persons.

An RCASP may use a third party to carry out due-diligence activities. However, the legal responsibility for compliance continues to remain with the RCASP.

Prescribed documentation and records are generally required to be retained for at least seven tax years after the relevant reporting period.

What happens if the Section 509 statement is defective?

If the prescribed income-tax authority considers the statement defective, it may intimate the defect to the reporting entity and provide an opportunity to rectify it.

Section 509 generally allows 30 days for rectification, although the authority may permit a further period.

If the defect is not corrected within the permitted period, the statement may be treated as containing inaccurate information.

What happens if the statement is not furnished?

If a reporting entity fails to furnish the required statement, the prescribed income-tax authority may issue a notice requiring the statement to be filed within a period not exceeding 30 days from the date of service of the notice.

What if an inaccuracy is discovered after filing?

Where the reporting entity discovers an inaccuracy after furnishing the statement, section 509 requires it to inform the prescribed authority within 10 days and furnish the corrected information in the prescribed manner.

Penalty for failure to comply with Section 509

The Finance Act, 2026 substituted section 446 of the Income-tax Act, 2025 to prescribe specific penalties relating to crypto-asset reporting under section 509.

The substituted section 446 applies from 1 April 2026.

Section 509 is different from taxation of crypto income

Section 509 does not prescribe the 30% tax rate applicable to income from transfer of Virtual Digital Assets.

Under the Income-tax Act, 2025, the substantive tax provision is contained in section 194, Table Sl. No. 4. It provides a 30% tax rate for income from transfer of a Virtual Digital Asset, subject to the conditions prescribed under the Act.

Broadly, except for the cost of acquisition, specified deductions are not permitted while computing such income. A loss arising from transfer of a VDA cannot generally be set off against other income or carried forward.

This corresponds to the erstwhile section 115BBH of the Income-tax Act, 1961.

Similarly, the 1% TDS provision previously contained in section 194S of the Income-tax Act, 1961 is reflected under the new Act in section 393(1), Table Sl. No. 8(vi), subject to the applicable conditions and thresholds.

Example of Section 509 reporting

Suppose a crypto exchange satisfies the Indian nexus requirements under Rule 242 and has customers who are identified through the Rule 244 due-diligence process as reportable foreign tax residents.

During Calendar Year 2026, these users undertake:

• Bitcoin purchases against INR
• Bitcoin sales
• exchange of Bitcoin for another relevant crypto-asset and
• transfers to external wallets.

The RCASP must maintain and aggregate the prescribed information relating to these transactions and furnish the relevant information in Form No. 167 by 31 May 2027.

A crypto-to-crypto transaction may also be reportable even though no fiat currency was involved.

The customer's own tax liability on crypto income, where applicable, is a separate matter governed by the relevant provisions dealing with taxation of Virtual Digital Assets.

Common misunderstandings about Section 509

1. Every crypto investor has to file Form 167

Incorrect. Form 167 is a reporting statement required from prescribed Reporting Crypto-Asset Service Providers. It is not an annual form that every crypto investor has to independently file.

2. Section 509 imposes the 30% tax on crypto

Incorrect. Section 509 deals with information reporting. The special tax rate for VDA income is separately provided under section 194 of the Income-tax Act, 2025.

3. Only sale of crypto for INR is reportable

Incorrect. The reporting rules also cover prescribed crypto-to-crypto exchanges and different categories of transfers.

4. If there are no reportable users, nothing has to be filed

Not necessarily. Rule 243 provides for furnishing a nil statement where no reportable user or reportable controlling person is identified.

5. Section 509 has no penalty

Incorrect. Section 446 of the Income-tax Act, 2025, as substituted through the Finance Act, 2026, contains specific penalty provisions for defaults connected with section 509 reporting.

Key takeaways

• Section 509 establishes India's statutory crypto-asset information-reporting framework.
• The provision is effective from 1 April 2026.
• Detailed reporting and due-diligence requirements are contained in Rules 241 to 244 of the Income-tax Rules, 2026.
• Reporting is primarily undertaken by prescribed Reporting Crypto-Asset Service Providers.
• The prescribed reporting statement is Form No. 167.
• The reporting rules cover relevant calendar years beginning on or after 1 January 2026.
• For Calendar Year 2026, Form 167 is due by 31 May 2027.
• Crypto-to-crypto transactions and specified transfers can also come within the reporting framework.
• Section 509 reporting is separate from the taxation of an investor's VDA income.
• Section 446 prescribes penalties for specified reporting and due-diligence failures.

Conclusion

Section 509 of the Income-tax Act, 2025 creates a detailed information-reporting framework for crypto-asset transactions. From 1 April 2026, prescribed crypto-asset service providers must comply with the requirements contained in Rules 241 to 244, including identifying reportable users, carrying out prescribed tax-residence due diligence, maintaining transaction information and furnishing Form No. 167.

For Calendar Year 2026, the first Form 167 statement is due on 31 May 2027.

Individual taxpayers should remember that Section 509 reporting is different from their own obligation to correctly disclose and pay tax on Virtual Digital Asset income in the applicable Income-tax Return.

For Assisted Service, please WhatsApp us on +91-9320546101 or raise a support ticket here