CBDT Releases Revised FATCA and CRS Guidance Note Under Income Tax Rules 2026

Kaustav Chowdhury

Aug 18

6 min read

On July 24, 2026, the Central Board of Direct Taxes (CBDT) released a comprehensively revised Guidance Note on the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). Issued by the Ministry of Finance's Foreign Tax and Tax Research Division, the revised Guidance Note aligns the reporting framework for financial institutions with section 508 of the Income Tax Act, 2025, Rules 238 to 240, and Form 166 of the Income Tax Rules, 2026. The document incorporates the OECD CRS 2025 amendments and expands the reporting scope to cover specified electronic money products (SEMPs), central bank digital currencies (CBDCs), and crypto-assets, marking the most significant update to India's automatic exchange of financial account information framework in a decade.

Background and Context

India has been an active participant in the global Automatic Exchange of Information (AEOI) framework since its first exchanges under the CRS in 2017. The country signed the India-USA Intergovernmental Agreement (IGA) on FATCA on July 9, 2015, which requires Indian Reporting Financial Institutions (RFIs) to report information on U.S. persons to the Indian tax authorities for onward transmission to the United States. As of 2026, India exchanges CRS information with over 120 partner jurisdictions annually, making it one of the largest participants in the global information exchange network.

The earlier legal framework was governed by section 285BA of the Income Tax Act, 1961, and implemented through Rules 114F to 114H of the Income Tax Rules, 1962. Under that regime, RFIs were required to file an annual statement of reportable accounts in Form 61B. The previous Guidance Note, last updated on November 30, 2016, served as the reference document for compliance. With the enactment of the Income Tax Act, 2025, and the notification of the Income Tax Rules, 2026 on March 20, 2026, the entire legal framework has been overhauled. Section 508 of the new Act now governs reporting obligations for FATCA and CRS, while Rules 238 to 240 prescribe the detailed requirements. Entities with cross-border operations should consider how the expanded information exchange framework interacts with other international tax obligations, including permanent establishment risk under India's DTAAs.

At the international level, the OECD's consolidated text of the CRS (CRS 2025), published in July 2025, modernized the framework by addressing products and arrangements that have gained prominence in recent years, including certain electronic money products and central bank digital currencies. India has incorporated these amendments into its domestic rules, ensuring alignment with the evolving global standard.

Key Changes in the Revised Guidance Note

The revised Guidance Note introduces several important changes that Reporting Financial Institutions must take note of.

Transition to the Income Tax Act, 2025 Framework: All statutory references have been updated from the Income Tax Act, 1961 and Income Tax Rules, 1962 to the corresponding provisions of the new legislation. Section 508 of the Income Tax Act, 2025 now serves as the statutory basis for FATCA and CRS reporting, replacing the erstwhile section 285BA. The transition also affects related compliance obligations, much as the computation of MAT under section 115JB has been subject to legislative updates.

Introduction of Form 166: The annual statement of reportable accounts is now to be filed in Form 166, which replaces Form 61B with effect from April 1, 2026. The filing deadline remains May 31 of each year. The form has been redesigned to accommodate the expanded scope of reporting, including new account types for SEMPs, CBDCs, and crypto-assets.

Expanded Reporting Scope for Digital Assets: In line with the CRS 2025 amendments, the Guidance Note expands the categories of reportable accounts to include the following:

SEMP depository accounts held by e-money issuers and digital payment platforms that hold specified electronic money products for customers.
CBDC accounts maintained by central banks (for retail customers who are not financial institutions, governmental entities, or international organisations) or by entities holding CBDCs on behalf of customers.
Equity and debt interests in investment entities that invest in or manage relevant crypto-assets, treated as financial accounts with effect from January 1, 2026.

Crypto-Asset Reporting Framework Under Section 509: Entirely new provisions under section 509 of the Income Tax Act, 2025 implement the CRS 2.0 framework, introducing reporting obligations for crypto-asset service providers, e-money product issuers, and entities dealing in central bank digital currencies. These provisions are governed by Rules 241 to 244 of the Income Tax Rules, 2026, and represent a significant expansion of India's information exchange infrastructure into the digital asset ecosystem.

Updated Categories of Financial Institutions: The Guidance Note provides revised classifications of Reporting and Non-Reporting Financial Institutions under Rule 238(5) of the Income Tax Rules, 2026. Notably, central banks that maintain CBDCs for account holders who are not themselves financial institutions, governmental entities, international organisations, or central banks are now treated as Reporting Financial Institutions for non-U.S. reportable accounts, rather than being exempt.

Enhanced Due Diligence and Self-Certification: The document provides updated guidance on account classification, mandatory self-certification requirements, aggregation rules for linked accounts, and the treatment of pre-existing accounts. The cut-off date for CRS 2025 amendment accounts (new financial account types such as SEMPs and CBDCs) is December 31, 2025, with accounts opened on or after January 1, 2026 treated as new accounts for the expanded categories. The Guidance Note also includes new diagrams, flow charts, and an extensive set of frequently asked questions to assist stakeholders in navigating the due diligence process.

Analysis and Implications

The revised Guidance Note carries significant implications for a wide range of financial sector participants. For traditional financial institutions such as banks, insurers, custodians, and mutual funds, the primary impact is the transition to Form 166 and the need to update internal systems, processes, and training materials to reflect the new statutory references. While the substantive due diligence and reporting obligations remain largely consistent with the earlier framework, the shift to the Income Tax Act, 2025 requires careful review of internal compliance manuals and standard operating procedures.

The more consequential changes affect fintech platforms, digital payment service providers, and entities operating in the crypto-asset space. Mobile wallet operators and e-money issuers that hold SEMPs for customers are now classified as Depository Institutions under the framework. Platforms dealing in crypto-assets may qualify as Investment Entities or fall within the scope of the new CRS 2.0 rules under section 509 and Rules 241 to 244. These entities will need to register with the Income Tax Department, implement due diligence procedures, and begin filing Form 166. The compliance burden is comparable to the recent mandatory GSTIN requirements in e-invoice and e-way bill APIs, reflecting a broader trend of tightening digital compliance infrastructure.

Non-compliance carries significant consequences. Penalties include Rs 500 per day for late filing of the statement, escalating to Rs 1,000 per day after the issuance of a notice by the prescribed income tax authority. Furnishing inaccurate information attracts a penalty of Rs 50,000, with an additional Rs 5,000 where the inaccuracy is attributable to false information provided by the account holder. Where a Reporting Financial Institution is found to be significantly non-compliant, the matter may be referred through the competent authority mechanism for remedial action, potentially attracting regulatory scrutiny from partner jurisdictions.

The expanded scope of information exchange also has implications for cross-border tax planning. The data reported under FATCA and CRS may be used by partner jurisdictions in their compliance and risk assessment initiatives, potentially triggering scrutiny of tax positions in multiple jurisdictions. Entities with international operations should review their reporting obligations holistically, considering the interplay between FATCA, CRS, transfer pricing documentation, and treaty provisions.

Key Takeaways

Form 166 replaces Form 61B for the annual statement of reportable accounts, effective April 1, 2026, with the filing deadline of May 31 each year.
The Guidance Note aligns reporting obligations with section 508 of the Income Tax Act, 2025, and Rules 238 to 240 of the Income Tax Rules, 2026.
Reporting scope now extends to specified electronic money products (SEMPs), central bank digital currencies (CBDCs), and crypto-assets, in line with the OECD CRS 2025 amendments.
Section 509 of the Income Tax Act, 2025 introduces the Crypto-Asset Reporting Framework (CRS 2.0), implemented through Rules 241 to 244 of the Income Tax Rules, 2026.
Penalties for non-compliance include Rs 500 per day for late filing (Rs 1,000 per day post-notice), Rs 50,000 for inaccurate information, and Rs 5,000 for inaccuracy attributable to an account holder's false data.
Central banks maintaining retail CBDCs are now classified as Reporting Financial Institutions for non-U.S. reportable accounts.
The transitional window for controlling person role reporting and equity interest holder role reporting expires on December 31, 2027.
As of 2026, India exchanges CRS information with over 120 partner jurisdictions annually.

Conclusion

The revised FATCA and CRS Guidance Note represents a substantial and timely update to India's automatic exchange of information framework. By aligning the domestic framework with the Income Tax Act, 2025 and the CRS 2025 consolidated text, the CBDT has ensured that India's reporting infrastructure remains consistent with global standards. Financial institutions, particularly those in the fintech and digital asset sectors, should prioritize reviewing their compliance frameworks, updating registration details, and implementing the necessary system changes well before the May 31 filing deadline. Given the expanding scope of cross-border information exchange, the costs of non-compliance, both in terms of monetary penalties and reputational risk, make early preparation essential.