Until 2023 a common view among Indian traders was that a foreign exchange was outside Indian tax — no TDS, no reporting, no problem. That view was always wrong on the law, and it is now wrong on the facts as well. The offshore platforms have registered with India's financial intelligence unit, they deduct Indian TDS, and from 2027 they will report Indian users' accounts automatically. This note sets out what a resident user of a foreign exchange must do, and what happens if they do not.
Quick answer
- Tax follows residence: For an Indian resident, gains on Binance, Bybit or Kraken are taxed exactly as gains on Indian exchanges: 30% under section 194 (115BBH of the 1961 Act), cost the only deduction, no set-off of losses.
- Registered exchanges deduct TDS: A registered offshore exchange deducts 1% TDS under section 393 (194S of the 1961 Act) on Indian users' transfers, which then appears in Form 26AS.
- Disclose in Schedule FA: A resident's foreign exchange account held during the calendar year must be disclosed in Schedule FA, and on a cautious view a self-custodied wallet too; non-disclosure can attract a ₹10 lakh penalty per year unless foreign assets other than immovable property total ₹20 lakh or less.
- Regularise before CARF data: Foreign exchanges are due to start reporting Indian residents' accounts under CARF from 2027, so missed income can be offered through an updated return before that data arrives.
Tax follows residence, not the platform
A person resident in India is taxed on worldwide income. Gains on Binance, Bybit, Kraken, Coinbase, OKX or a decentralised exchange are taxed exactly as gains on WazirX or CoinDCX: 30% under section 194 (115BBH), cost the only deduction, no set-off of losses. The absence of TDS on a platform does not reduce the tax; it only removes the credit that would have been available.
FIU-IND registration and TDS on offshore platforms
Under the Prevention of Money Laundering Act, any virtual-asset service provider that serves Indian users — wherever it is based — must register with FIU-IND as a reporting entity, run KYC, and report suspicious transactions. In 2023–24 the government blocked the applications of platforms that had not registered; the largest have since registered and returned. A registered offshore exchange also deducts 1% TDS under section 393 (194S) on Indian users' transfers, which then appears in Form 26AS. Where a platform does not deduct — a decentralised exchange, a peer-to-peer trade, an unregistered platform — the obligation to deduct falls on the buyer, and in practice the user files with no TDS credit and a transaction the department can see but cannot match.
Schedule FA: the disclosure most users miss
An account on a foreign exchange is a foreign asset. A resident who held such an account at any time during the calendar year (and, on a cautious view, a self-custodied wallet) must disclose it in Schedule FA of the return — the platform, the account, the peak and closing balances, and income earned — whether or not any income arose. Non-disclosure can attract a penalty of ₹10 lakh per year under the Black Money Act unless foreign assets other than immovable property total ₹20 lakh or less, and undisclosed foreign assets are taxed at 30% of their value with a penalty of three times the tax. The 2025 amendments also placed undisclosed VDAs within undisclosed income in search cases. Schedule FA is filed only in ITR-2 or ITR-3, and the calendar-year basis (January to December) differs from the financial year for the rest of the return.
Funding the account: LRS and TCS
Money sent from India to a foreign exchange is a remittance under the Liberalised Remittance Scheme, limited to USD 250,000 a year, and attracts TCS at 20% above ₹10 lakh in the year (creditable in the return). Card payments to a foreign platform count. Banks may decline remittances whose stated purpose is crypto purchase, and routing them through a friend's account or a misdeclared purpose is a FEMA contravention on top of the tax exposure. Buying stablecoins on an Indian exchange and transferring them to a foreign one is common and not expressly prohibited, though its FEMA treatment has not been clarified — for tax, the transfer is your own asset moving between your own accounts — but the original purchase and every later disposal are on the record.
What the department sees, and when
| Source | What it shows | From |
|---|---|---|
| Indian exchanges | Every trade against your PAN, in the AIS | Already |
| TDS under section 393 (194S) by registered offshore exchanges | Transfers and consideration in Form 26AS | Already |
| Bank LRS records | Remittances abroad by purpose code, matched to the return | Already |
| Reporting-entity statements from Indian and registered platforms | Crypto-asset transaction statements furnished to the department | 1 April 2026 |
| Foreign exchanges under CARF | Account balances and transactions of Indian residents, exchanged automatically between tax authorities | 1 April 2027 |
If you have not reported so far
The clean route is an updated return for the years still open — within 48 months of the end of the assessment year, with additional tax of 25% rising to 70% — reporting the gains and the Schedule FA disclosure, before the data arrives under CARF. The penalties for voluntary correction are a fraction of those after a notice, and once a reassessment notice arrives an updated return can be filed only within the time the notice allows, at a higher additional tax. For the current year, file correctly: ITR-2 or ITR-3, every transfer in Schedule VDA, every foreign account in Schedule FA, TDS reconciled, advance tax paid on the quarterly dates.
Records to keep
Full trade history exports from each platform (most allow a CSV download for each year), wallet addresses and transaction hashes for self-custody, screenshots of balances at 31 December for Schedule FA, LRS remittance advices, and the TDS certificates. Reconstructing three years of trades from memory after a notice arrives is expensive; keeping the exports is not.
Questions we are asked
Is TCS charged when I send money from India to Binance or Bybit? Yes. Money sent from India to a foreign exchange is an LRS remittance, limited to USD 250,000 a year, and attracts TCS at 20% above ₹10 lakh in the year, creditable in the return.
Which ITR form do I use to report crypto held on a foreign exchange? ITR-2 or ITR-3. Schedule FA is filed only in ITR-2 or ITR-3, on a calendar-year basis (January to December), and every crypto transfer goes in Schedule VDA.
Is it legal to move stablecoins from an Indian exchange to a foreign exchange like Binance? It is common and no specific rule prohibits it, but the FEMA position on moving crypto to a foreign platform has not been clarified, and the original purchase and every later disposal are on the record.
How far back can I file an updated return for unreported crypto gains? Within 48 months of the end of the assessment year, with additional tax of 25% rising to 70%. Since the Finance Act, 2026 it can also be filed after a reassessment notice, within the time the notice allows and at a further 10 percentage points, but not once a search or survey has begun.
Regularise before 2027
We reconstruct histories across Indian and foreign platforms, compute the gains, prepare Schedule VDA and Schedule FA, and where years were missed, file updated returns on the best available terms. Crypto and digital assets or contact us.
Disclaimer
This note is for general information and knowledge purposes only. It describes the position as at 19 October 2026 and is not legal, tax or professional advice. Tax law changes frequently; please confirm the current position with us before acting.
Tax, GST and business setup advisors — Mumbai and Thane. Contact us to discuss your situation.
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