From April 2027, a global reporting regime will require foreign platforms to share detailed transaction data with India, stripping offshore trading of the anonymity that once made it attractive and forcing both users and exchanges into a far more transparent system.
The OECD’s Crypto-Asset Reporting Framework (CARF) enables automatic exchange of information between participating jurisdictions. Once India signs the Multilateral Competent Authority Agreement and the system becomes operational, foreign exchanges and custodians will be required to share user names, addresses, tax-residency status, wallet identifiers and transaction volumes.
For an industry already subject to a 1 percent tax deducted at source and a 30 percent capital gains tax, CARF is likely to dismantle the protection that geographical distance once offered against Indian tax scrutiny.
The framework will operate alongside Section 285BAA of the Income-tax Act, which came into effect in April 2026 and mandates domestic reporting of crypto transactions. Together, the two regimes are expected to close the information gap that has allowed offshore trading to escape tax visibility.
Legal experts and exchange operators view CARF as a catalyst for behavioural change, industry consolidation and closer regulatory coordination, while also exposing tensions between tax transparency and data protection.
A three-layer compliance regime
Section 285BAA requires exchanges and other specified entities to report transactions above prescribed thresholds, along with KYC details and information on consideration paid or received. When CARF is added, platforms will have to comply with three overlapping systems: domestic tax reporting, anti-money laundering rules under the Prevention of Money Laundering Act (PMLA), and international information exchange.
Since crypto platforms were classified as reporting entities under PMLA in 2023, the Financial Intelligence Unit-India has blocked several offshore platforms, including BitMEX, Poloniex and AscendEx, unless they register in India.
“India’s adoption of CARF will eliminate the distinction between onshore and offshore platforms,” explains Anirban Mohapatra, partner at Cyril Amarchand Mangaldas. “Jurisdictional distance will no longer shield exchanges from Indian reporting obligations, and platforms servicing Indian users will have to recalibrate compliance frameworks accordingly.”
Hardeep Sachdeva, senior partner at AZB & Partners, said CARF would intensify regulatory obligations. “The overlap with PMLA is inevitable,” he said. “CARF reporting will not replace AML obligations; it may amplify them. Exchanges will need to build compliance architectures that treat tax transparency and AML as converging, not parallel, duties.”
In January 2026, FIU-IND tightened KYC norms, replacing basic document uploads with live selfies, geo-tagging and bank-account verification.
“Exchanges must treat CARF disclosures as an extension of their AML/KYC framework. The compliance focus will be on consistency—any mismatch between what is reported to tax authorities under CARF and to FIU-IND under PMLA will be treated as a regulatory red flag, inviting immediate scrutiny and potential action,” Mohapatra added.
Domestic exchanges brace for higher costs and tighter scrutiny
Executives at WazirX say CARF will require deep changes in how Indian platforms manage data, compliance and reporting. Nishchal Shetty, founder and chief executive officer of WazirX, said the company has begun reworking its systems well ahead of the 2027 deadline. “We’re treating CARF-style reporting as a multi-year data governance and controls programme. The core build has three components: enhanced customer due diligence procedures to capture tax residency accurately, a transaction classification engine that can reliably distinguish exchange transactions from transfers across various transaction types, and a reporting infrastructure with appropriate data security and audit trails.”
While the company is not disclosing cost estimates, Shetty said the investment would be “material” for a scaled exchange, with ongoing expenses driven more by compliance operations and data quality controls than by one-time technology upgrades.
On the business side, WazirX expects CARF to reduce the incentive for Indian users to route trades through foreign platforms, but says the pace and scale of any migration remain uncertain. “It’s reasonable to expect some change in routing patterns once cross-border information exchange becomes operational, particularly where offshore use was driven primarily by reporting opacity,” says Shetty.
However, the crypto platform remains cautious about making volume predictions for several reasons. According to Shetty, user behaviour will depend on enforcement signals, banking access and regulatory clarity, as well as non-tax factors such as liquidity and product range. Rather than relying on a surge in returning volumes, he said WazirX is focusing on strengthening execution quality, INR liquidity, custody standards and tax documentation, while positioning itself for institutional investors through stronger governance, audit readiness and operational controls.
Data sovereignty and transparency
CARF also raises data protection concerns. India’s Digital Personal Data Protection (DPDP) Act permits data processing for tax compliance but regulates cross-border transfers through a restrictive framework.
This could result in Indian authorities receiving information from jurisdictions that may later face outbound transfer restrictions, exposing users to enforcement based on data that cannot be reciprocated.
Rohit Jain, managing partner at Singhania & Co., said coordination would be critical. “While CARF relies on MCAA for automatic exchange, the transfer of sensitive metadata may have to balance the DPDP’s ‘reasonable security’ mandates,” he said. “Challenges may arise if certain jurisdictions are ‘notified’ as restricted, which may then complicate the reciprocal data flow required for CARF to function in juxtaposition with India’s localised data regime.”
“While CARF is designed for tax transparency, the DPDP Act is rooted in data sovereignty. The tension between these regimes will test whether crypto-transaction data can be shared abroad without undermining the statutory requirement of purpose limitation and consent,” said Sachdeva.
“From a data privacy standpoint, CARF disclosures can be justified as legitimate use under the DPDP Act, since automatic data sharing becomes necessary to meet Indian tax compliance obligations. The challenge will be in the operational tenability of these exceptions, as over-extension or misuse of these provisions could trigger sovereignty and privacy concerns,” said Mohapatra.
Impact on users
India has an estimated 20 million crypto users, largely aged between 18 and 35. For many, offshore platforms have so far offered relative opacity. CARF is expected to end this.
Once foreign data is linked to domestic records, authorities will gain access to historical trading patterns and cross-border wallet movements.
“Once foreign CARF feeds are integrated into PAN-based tax profiles, the audit strategy of the tax department may shift from reactive scrutiny to proactive cross-verification,” Sachdeva said. “Expect algorithmic matching of offshore wallet addresses with domestic filings, and a sharper focus on unexplained capital inflows.”
Mohapatra said the information could be integrated into India’s wider digital tax infrastructure. “It is likely that the CARF data may be operationalised through India’s evolving PAN 2.0 Project,” he said. “This initiative re-engineers taxpayer registrations, consolidates PAN and TAN processes, and positions PAN as a common digital identifier across government systems. Once offshore transaction data flows in, the department can algorithmically match it against PAN-linked profiles.”
