The Central Board of Direct Taxes (CBDT), Department of Revenue, Ministry of Finance, has released a comprehensive and revised Guidance Note on the Foreign Account Tax Compliance Act and the Common Reporting Standard. The Guidance Note has been prepared by the Foreign Tax and Tax Research Division of the CBDT to assist Reporting Financial Institutions, regulators, tax professionals and officers of the Income Tax Department in complying with India’s Automatic Exchange of Information framework.
Released on 24 July 2026, the revised Guidance Note explains the obligations of Reporting Financial Institutions under section 508 of the Income-tax Act, 2025, Rules 238 to 240 and Form 166 of the Income-tax Rules, 2026. It presents the statutory reporting and due-diligence requirements in a practical and accessible manner.
The revised document replaces and substantially updates the earlier Guidance Note issued in August 2015 and revised periodically during 2015 and 2016. The latest edition incorporates the Income-tax Rules, 2026 and the OECD’s consolidated Common Reporting Standard of 2025.
The Guidance Note reflects significant developments in the international and domestic tax-transparency framework, including amendments to the Common Reporting Standard, the enactment of the Income-tax Act, 2025 and the notification of the Income-tax Rules, 2026.
India has consistently supported global initiatives aimed at enhancing tax transparency and combating offshore tax evasion. Under FATCA and CRS, India receives financial-account information concerning its residents from partner jurisdictions and reciprocally provides information relating to persons resident in those jurisdictions.
The information exchanged under these arrangements supports the Income Tax Department’s compliance, intelligence and risk-assessment functions and contributes to the protection of India’s revenue base and the integrity of the tax system.
FATCA was enacted by the United States in 2010 to address tax evasion involving offshore financial accounts held by United States citizens and residents. The Intergovernmental Agreement between India and the United States was signed on 9 July 2015 and came into force in India on 31 August 2015.
Under the India–United States Intergovernmental Agreement, Indian Reporting Financial Institutions furnish prescribed information to the Indian tax authorities, which subsequently transmit such information to the United States authorities through the automatic exchange mechanism.
The Common Reporting Standard was developed by the OECD and G20 as a global framework for the annual automatic exchange of financial-account information. India was an early adopter of CRS and commenced its first exchanges under the framework in 2017.
The Guidance Note states that more than 120 jurisdictions participate in the CRS exchange framework as of 2026. India exchanges CRS information annually with its partner jurisdictions.
Following the changes in direct-tax legislation, the FATCA and CRS reporting framework in India is now governed by Rules 238 to 240 of the Income-tax Rules, 2026, effective from 1 April 2026.
The annual statement of reportable accounts is now required to be furnished in Form 166, which replaces Form 61B with effect from 1 April 2026. Form 166 is prescribed as the Annual Statement of Reportable Accounts under the new Rules.
Reporting Financial Institutions are required to furnish Form 166 by 31 May of each year in respect of the prescribed reporting period. The Guidance Note also addresses the requirement to furnish a NIL statement where no reportable accounts have been identified, in accordance with the applicable provisions.
The Guidance Note explains the reporting process through a structured sequence under which Reporting Financial Institutions must:
- determine whether they qualify as Reporting Financial Institutions;
- review the financial accounts maintained by them;
- identify reportable accounts;
- apply the prescribed due-diligence procedures; and
- furnish the relevant account information in Form 166.
The process diagram contained on page 23 of the Guidance Note illustrates the compliance flow from identification of a Reporting Financial Institution to review of financial accounts, application of due diligence and reporting of information in Form 166.
A Reporting Financial Institution generally includes a financial institution resident in India, excluding its branches situated outside India, and a branch situated in India of a financial institution that is not resident in India. Non-Reporting Financial Institutions are excluded from the reporting obligation.
The Guidance Note prescribes a four-step test for determining whether an entity is a Reporting Financial Institution. The entity must first qualify as an entity, then as a financial institution, have the required connection with India and not fall within a category of Non-Reporting Financial Institution.
Only entities can qualify as Reporting Financial Institutions. The term includes companies, partnerships, trusts, foundations, Hindu undivided families and other legal persons or legal arrangements. Individuals, including sole proprietorships, do not qualify as RFIs.
A financial institution may fall within one or more of the following four categories:
- Custodial Institution;
- Depository Institution;
- Investment Entity; or
- Specified Insurance Company.
A Custodial Institution is generally an entity that holds financial assets for the account of others as a substantial portion of its business. Custodian banks, central securities depositories, brokers and depository participants may fall within this category.
A Depository Institution generally includes an entity that accepts deposits in the ordinary course of a banking or similar business. Savings banks, commercial banks, cooperative banks, credit unions and similar institutions may accordingly qualify as Depository Institutions.
With effect from 1 January 2026, the definition of Depository Institution for non-US reportable accounts has been expanded to include entities holding Specified Electronic Money Products or Central Bank Digital Currencies for the benefit of customers.
Consequently, mobile-wallet operators and electronic-money issuers holding qualifying electronic-money products for customers, as well as entities maintaining retail CBDC accounts, may fall within the scope of the CRS reporting framework.
A Specified Electronic Money Product generally refers to a digital representation of a single fiat currency that is issued on receipt of funds for making payments, represents a claim on the issuer, is accepted by persons other than the issuer and is redeemable at par value in the same currency.
A Central Bank Digital Currency refers to digital fiat currency issued by a central bank. Accounts holding CBDCs for customers may be treated as Depository Accounts under the revised framework.
An Investment Entity generally includes an entity whose primary business consists of trading in financial instruments, portfolio management, or investing, administering or managing financial assets or money on behalf of customers.
For CRS purposes, the scope of an Investment Entity may also cover entities investing, administering or managing relevant crypto-assets on behalf of other persons, subject to the conditions prescribed under the Rules.
Non-Banking Financial Companies are required to determine their classification on the basis of their actual activities. An NBFC accepting deposits in the course of a banking or similar business may qualify as a Depository Institution, while an NBFC carrying on portfolio or asset-management functions may qualify as an Investment Entity.
Where an entity qualifies under more than one category of financial institution, it is required to register under all applicable categories and furnish separate Form 166 statements for the respective categories.
A Specified Insurance Company generally includes an insurance company, or the holding company of an insurance company, that issues or is required to make payments under a Cash Value Insurance Contract or an Annuity Contract.
Insurance companies providing only general insurance, term-life insurance or indemnity reinsurance would ordinarily not qualify as financial institutions solely on that account.
The Guidance Note also lists the categories of Non-Reporting Financial Institutions, which may include specified governmental entities, international organisations, central banks, retirement funds, public-sector funds, qualified credit-card issuers, exempt collective investment vehicles and trustee-documented trusts, subject to the prescribed conditions.
The exemption available to a central bank is subject to specified exceptions. A central bank maintaining CBDCs for retail account holders who are not financial institutions, governmental entities, international organisations or central banks may be treated as a Reporting Financial Institution for the relevant non-US accounts.
The Guidance Note clarifies that the National Pension System Trust is the Reporting Financial Institution responsible for furnishing information relating to the relevant NPS investors.
Reporting Financial Institutions are required to review all financial accounts maintained by them to identify reportable accounts. Financial accounts may include Depository Accounts, Custodial Accounts, equity or debt interests in certain Investment Entities, Cash Value Insurance Contracts and Annuity Contracts.
With effect from 1 January 2026, financial accounts for CRS purposes also include qualifying accounts representing Specified Electronic Money Products and accounts holding one or more Central Bank Digital Currencies for customers.
The revised Guidance Note provides detailed procedures for reviewing pre-existing and new accounts held by individuals and entities. It separately addresses lower-value accounts, high-value individual accounts, entity accounts, joint accounts and accounts held by trusts and partnerships.
Pre-existing individual accounts having a balance or value exceeding USD 1 million are treated as high-value accounts and are subject to enhanced due-diligence procedures, including review of prescribed records and, where applicable, relationship-manager knowledge.
Reporting Financial Institutions must obtain valid self-certifications to determine the tax residence and status of account holders and controlling persons. The self-certification must be tested for reasonableness against other information obtained in connection with account opening and anti-money-laundering or Know Your Customer procedures.
Where a self-certification is found to be unreliable or inconsistent with the information available to the institution, the Reporting Financial Institution must obtain a valid self-certification or appropriate documentary evidence before relying upon it.
A change in circumstances that affects the correctness or reliability of an existing self-certification requires the institution to review the account and obtain updated information within the prescribed period.
The Guidance Note explains the account-aggregation rules to ensure that linked accounts held by the same person are considered together for determining the applicability of prescribed balance or value thresholds.
Form 166 requires Reporting Financial Institutions to furnish prescribed information relating to each reportable account, including details of the account holder, controlling persons, tax residence, Taxpayer Identification Number, account number, account type, account balance or value and the prescribed financial amounts.
The revised framework incorporates new mandatory reporting fields introduced pursuant to the CRS amendments. These include additional account and controlling-person information intended to improve the quality and usability of data exchanged between jurisdictions.
The Guidance Note provides detailed instructions on the reporting of Taxpayer Identification Numbers, dates and places of birth, addresses, jurisdiction of residence, jointly held accounts, closed accounts and account balances or values.
The revised Guidance Note also addresses United States Taxpayer Identification Number requirements under FATCA, available temporary relief under applicable United States Internal Revenue Service notices and the use of prescribed placeholder codes in specified circumstances.
Indian RFIs covered by FATCA may also be required to obtain a Global Intermediary Identification Number and comply with the requirements applicable under the India–United States Intergovernmental Agreement.
The Guidance Note explains the Significant Non-Compliance process under FATCA. Where an Indian Reporting Financial Institution is found to be significantly non-compliant, the matter may be referred through the competent-authority mechanism for remedial action.
A dedicated chapter explains the reporting treatment of trusts, partnerships and similar legal arrangements. The obligations differ depending on whether the trust itself qualifies as a Reporting Financial Institution or is treated as a Non-Financial Entity.
Where a trust is a Reporting Financial Institution, information relating to its prescribed equity-interest holders may be reportable. Where a trust is treated as a Passive Non-Financial Entity, Reporting Financial Institutions may be required to identify and report its controlling persons.
The Guidance Note incorporates specific reporting roles for controlling persons of trusts and equity-interest holders. A transitional window for certain controlling-person and equity-interest-holder role reporting is available up to 31 December 2027.
The revised document also explains the interaction of CRS with the Crypto-Asset Reporting Framework and the measures designed to prevent duplicative reporting of the same information under both frameworks.
The Guidance Note contains a dedicated chapter on the procedure for filing Form 166 on the Income Tax portal, including registration of the Reporting Financial Institution, appointment of the designated director and principal officer, preparation of the reporting file and submission through the prescribed electronic process.
The document also addresses prior-year remediation and correction of inaccurate information. Where an RFI discovers that information previously furnished was inaccurate or incomplete, it must undertake corrective filing in the prescribed manner.
Reporting Financial Institutions may appoint third-party service providers to assist with due diligence and reporting. However, the ultimate responsibility for compliance continues to remain with the Reporting Financial Institution.
Sectoral regulators are expected to support implementation and monitoring of the AEOI framework within their respective sectors. The Guidance Note provides for coordination between the Income Tax Department, regulators and Reporting Financial Institutions.
The Guidance Note includes an extensive set of 100 Frequently Asked Questions covering legal provisions, classification of financial institutions, reportable accounts, self-certification, due diligence, Form 166, FATCA-specific requirements, trusts, partnerships, digital financial products, currency conversion, cooperative banks, record retention and voluntary correction.
The Frequently Asked Questions specifically address emerging areas such as electronic-money products, prepaid-payment instruments, CBDCs, relevant crypto-assets and entities that may simultaneously qualify as a Reporting Financial Institution and a Reporting Crypto-Asset Service Provider.
The revised edition has also introduced additional diagrams, flow charts and decision trees to assist financial institutions in determining their classification and compliance obligations. These include visual tests for identifying RFIs, Custodial Institutions, Depository Institutions, Investment Entities and Specified Insurance Companies.
The Guidance Note has been issued for facilitation and compliance purposes. It does not constitute legal advice, and the statutory provisions of the Income-tax Act and Income-tax Rules will prevail in case of any inconsistency.
The release of the revised Guidance Note marks a significant step towards modernising India’s financial-account reporting framework and ensuring that it remains responsive to emerging financial products, digital-payment systems and international tax-transparency standards.
The initiative is expected to promote consistency in compliance, improve the quality of information reported by financial institutions and strengthen India’s continuing commitment to international cooperation against offshore tax evasion.
Source from: https://www.incometaxindia.gov.in/documents/d/guest/e-book-crs-and-fatca-guidance-note-faqs-pdf
