The Income Tax (Amendment) Rules, 2026 notified by the Ministry of Finance on 5 March 2026 represent a major step toward modernising India’s tax reporting system. The amendments align the country’s tax information framework with evolving global standards for digital assets, central bank digital currencies (CBDCs), and electronic-money instruments.
These reforms primarily modify Rules 114-F, 114-G, and 114-H of the Income Tax Rules, 1962, expanding the scope of reportable financial accounts and strengthening due diligence requirements for financial institutions. The Income Tax (Amendment) Rules, 2026 also integrate reporting obligations related to crypto-assets and digital money products into the broader tax information exchange system.
Objective of the Income Tax (Amendment) Rules, 2026
The main objective of the Income Tax (Amendment) Rules, 2026 is to ensure transparency in cross-border financial transactions and digital asset holdings. As financial technology evolves, governments worldwide are expanding tax reporting frameworks to cover digital currencies, crypto-assets, and electronic-money systems.
By updating the existing Income Tax Rules, 1962, the government aims to align domestic reporting practices with international standards such as the Common Reporting Standard (CRS) and emerging Crypto-Asset Reporting Framework (CARF) guidelines. These changes will enable tax authorities to obtain more accurate financial information from reporting institutions and reduce the risk of tax evasion through digital assets.
Key Amendments to Rule 114-F
One of the most significant updates under the Income Tax (Amendment) Rules, 2026 relates to Rule 114-F, which deals with definitions and classifications of financial accounts.
The amendment expands the scope of non-U.S. reportable accounts and replaces the term “financial institution” with “depository institution.” This change broadens the coverage of entities required to comply with reporting rules.
The definition of depository accounts has also been widened to include accounts that hold specified electronic-money products and CBDCs. As a result, institutions dealing with digital fiat currencies and certain e-money instruments may now fall within the reporting framework.
Several new definitions have been introduced to clarify the scope of digital financial assets. These include:
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Central Bank Digital Currency (CBDC): A digital version of fiat currency issued and regulated by a central bank.
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Relevant Crypto-Asset: Crypto-assets that are not CBDCs or specified electronic-money products and cannot be used for payment or investment.
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Specified Electronic Money Product: A digital representation of fiat currency issued against funds, accepted by third parties, and redeemable at par.
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Qualified Non-Profit Entity: A tax-exempt non-profit organization established in India with assets dedicated exclusively to public purposes.
The Income Tax (Amendment) Rules, 2026 also introduce special provisions for capital-foundation or capital-increase accounts. These accounts must meet simplified conditions such as blocked funds, independent verification, and restricted refunds only to original contributors.
Changes to Rule 114-G Reporting Requirements
The Income Tax (Amendment) Rules, 2026 also significantly revise Rule 114-G, which governs reporting obligations for financial institutions.
Under the revised rule, reporting entities must provide additional information when submitting financial account reports. Institutions will now need to disclose whether an account holder has provided self-certification, identify joint account holders, and specify the role of each controlling person in relation to the account.
Financial institutions must also classify accounts as new or pre-existing accounts and report gross proceeds from the sale or redemption of financial assets. In addition, the reporting framework now requires the collection of Taxpayer Identification Numbers (TIN) and date of birth information in compliance with the Prevention of Money Laundering Act, 2002 requirements.
However, the amendment clarifies that gross proceeds from crypto-asset transactions will not be reported under Rule 114-G if the same information has already been reported under the Crypto-Asset Reporting Framework (CARF) for non-U.S. accounts.
Amendments to Rule 114-H Due Diligence Procedures
The Income Tax (Amendment) Rules, 2026 also update Rule 114-H, which outlines due diligence procedures for identifying reportable accounts.
The rules revise the timeline for identifying “other reportable accounts.” The new reference dates are 1 January 2016 or 1 January 2026, depending on whether an account becomes reportable solely due to the revised Common Reporting Standard (CRS) requirements.
Similarly, the balance determination cut-off date is updated to 31 December 2015 or 31 December 2025 for accounts classified as financial accounts due to CRS revisions.
A new provision allows reporting institutions to temporarily treat new accounts as pre-existing accounts in exceptional situations until the required self-certification documentation is received from the account holder.
Additionally, financial institutions must apply similar procedures to identify controlling persons of non-U.S. reportable accounts when such information is not already mandated under PMLA regulations.
Impact of the Income Tax (Amendment) Rules, 2026
The Income Tax (Amendment) Rules, 2026 significantly expand the scope of tax reporting in India by incorporating CBDCs, crypto-assets, and electronic-money instruments into the financial reporting ecosystem. These changes are expected to enhance transparency in digital financial transactions and strengthen India’s participation in global tax information exchange networks.
Financial institutions, fintech companies, and digital asset platforms will need to review their compliance systems and reporting frameworks to ensure adherence to the revised Rules 114-F, 114-G, and 114-H. For taxpayers and investors dealing with digital assets, the amendments signal increased oversight and stricter reporting standards in the coming years.
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