The Government of India has issued significant amendments to the Income-tax Rules, 1962, aimed at strengthening the transparency and technological robustness of financial reporting systems. The Ministry of Finance’s Department of Revenue released the notification on March 5, 2026, introducing revisions in Rules 114F, 114G, and 114H. The updated provisions provide clearer regulatory guidance for monitoring digital financial assets, central bank digital currencies, and crypto-asset-related transactions.
CBDC and Crypto Definitions
Under the revised framework, “Central Bank Digital Currency” has been formally defined as any digital fiat currency issued by a central bank. The inclusion of this category is intended to support the expansion of the digital payment ecosystem while ensuring secure and controlled financial operations.
The notification also introduces the concept of “specified electronic money product”. A digital product that represents a single fiat currency in digital form, is issued upon receipt of funds for payment transactions, is redeemable at par value by the holder, and is accepted as payment by persons other than the issuer will fall under this category. Regulatory compliance standards have been established for the operation of such products.
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The new rules further specify that electronic money products that merely facilitate fund transfer services will not be classified under this category. If funds associated with such digital products are held for more than 60 days, they will be excluded from the definition.
The amendment also defines “relevant crypto-asset”. According to the notification, a crypto-asset that is not a central bank digital currency, not a specified electronic money product, or is assessed by the reporting service provider as unsuitable for payment or investment purposes will be treated under the reporting framework.
Reporting Framework Expanded
The definition of financial assets has also been expanded. Financial assets now include interests related to crypto-assets, including futures contracts, forward contracts, and options contracts. The objective of this amendment is to improve transparency and compliance in the digital investment market.
Reporting financial institutions are required to maintain detailed records of account self-certifications, joint account status, and controlling person roles. In the case of joint accounts, information regarding the number and identity of all joint account holders must also be preserved.
For accounts that are not U.S. reportable accounts, financial institutions must also record whether valid self-certification has been provided by the account holder. Additionally, identification details and roles of controlling persons must be maintained for reporting purposes.
The amendment further mandates due diligence procedures for accounts opened during the reporting period. In cases where self-certification cannot be obtained on time, institutions must temporarily apply procedures similar to those used for pre-existing accounts until certification is obtained and validated.
Compliance Procedures Updated
The notification also states that for accounts maintained up to December 31, 2025, information regarding controlling persons or equity interest holders must be reported only if such information is available in electronically searchable data maintained by the institution.
Reporting requirements regarding gross proceeds from the sale or redemption of financial assets have also been revised. Double reporting will be avoided if such proceeds have already been reported under the crypto-asset reporting framework.
Experts believe that these amendments are aligned with international tax cooperation mechanisms and the Common Reporting Standard framework. The expansion of digital financial transactions necessitates the adoption of modern technological tools in tax administration.
The government aims to curb tax evasion, detect suspicious financial activities, and strengthen global financial information exchange systems. The new rules are expected to assist financial institutions in implementing more structured data management and compliance processes.
About the author – Rehan Khan is a law student and legal journalist with a keen interest in cybercrime, digital fraud, and emerging technology laws. He writes on the intersection of law, cybersecurity, and online safety, focusing on developments that impact individuals and institutions in India.
