What is Section 285BAA?
Section 285BAA is the Crypto-Asset Reporting Framework Rules for Crypto Assets.
It is inserted into the Income-tax Act, effective 1 April 2026.
This section introduces reporting obligations for “reporting entities” in respect of crypto-assets (i.e., virtual digital assets).
Its purpose is to provide tax authorities with structured transaction-level data on crypto/VDA activity. This is to improve monitoring, compliance, and oversight.
It aligns with international frameworks like the OECD’s Crypto-Asset Reporting Framework (CARF) / Automatic Exchange of Information (AEOI) for crypto assets.
Key Elements/Obligations Under 285BAA (as per the Bill/Memorandum)
Here’s what the proposal indicates so far (subject to rules & further notifications):
| Feature | Proposed Provision |
|---|---|
| Who must report | Information in respect of crypto-asset transactions (details, user information, etc.). |
| What to report | The reporting entity must carry out due diligence for identification of crypto-asset users/owners, maintain records, etc. |
| When / period / manner | Within the prescribed time, in the prescribed form, and in the prescribed manner to the income tax authority. |
| Rectification / defect handling | The reporting entity must carry out due diligence for identification of crypto-asset users/owners, maintain records, etc. |
| Due Diligence & Record Maintenance | The reporting entity must carry out due diligence for identification of crypto-asset users/owners, maintain records etc. |
| Definition linkage | “Crypto-asset” is defined per subsection (d) of clause (47A) of section 2. |
Implications & What is Not Yet Defined
As of now, the exact list of what qualifies as a “reporting entity” (exchanges, wallet providers, miners, broker platforms, etc.) is to be prescribed via rules.
The format, thresholds (if any), timelines, penalties, and who bears what burden are not yet fully spelled out in the bill.
These will likely come via income-tax rules.
The enforcement/compliance mechanisms (penalties, notices, etc.) are expected to be aligned with other reporting provisions (defective statements, notices from the tax authority).
What 285BAA Proposes (As per Bill/Memorandum) in Detail
From the Explanatory Memorandum and related budget materials:
| Sub-section | What it provides | Key points / conditions |
|---|---|---|
| 285BAA(1) | Obligation of “reporting entity” to furnish information | Defect/rectification mechanism |
| 285BAA(2) | Defect / rectification mechanism | If a required person fails to furnish the statement in the prescribed time, the authority may issue a notice requiring them to furnish it within a specified time. |
| 285BAA(3) | Notice in case of non-filing | If a required person fails to furnish the statement in the prescribed time, the authority may issue a notice requiring them to furnish it within a specified time. |
| 285BAA(4) | Voluntary correction of inaccuracies | Rule-making power & registration/due diligence |
| 285BAA(5) | Rule-making power & registration / due diligence | The Central Government may, by rules, specify— • Persons who must register with income tax authorities; • Nature, form, manner of information to be maintained and furnished; • Due diligence procedures for identifying crypto-asset users/owners. |
Also, the bill proposes to amend the definition of “Virtual Digital Asset” (Section 2(47A)) by adding a sub-clause (d).
Any crypto-asset is a digital representation of value relying on a cryptographically secured distributed ledger.
These changes are to take effect from 1 April 2026.
What We Don’t Yet Know / What Needs Rules
Because 285BAA is just inserted in the Finance Bill/Act, many practical operational details are to be prescribed by rules. Key unknowns include:
- Exactly which entities will be “reporting entities” (crypto exchanges, wallet providers, brokers, miners, etc.).
- What thresholds (if any) will exempt small transactions or small users?
- The format, periodicity, and deadlines for furnishing statements.
- The penalties or consequences for non-compliance (beyond defect/notice).
- The registration requirements (who must register, how, and when).
- The due diligence/KYC/record-keeping procedures are to be mandated.
- Whether there will be transitional/grandfathering rules for existing crypto users.
- How this aligns with global standards such as the OECD’s Crypto-Asset Reporting Framework (CARF).