Virtual Digital Transaction Reporting

Virtual Digital Transaction Reporting is the process of reporting specified crypto-asset transactions to the Income Tax Department in the prescribed manner. From 1 April 2026, Section 285BAA of the Income-tax Act, 1961 provides for reporting obligations relating to transactions in crypto-assets for prescribed reporting entities.

The reporting requirements are relevant to entities that fall within the prescribed category of reporting entities. The exact information, reporting period, form and procedure depend on the applicable tax rules and the nature of the reporting entity.

My Startup Solution can assist businesses in organising transaction information and understanding the reporting requirements applicable to their activities.

Who Needs Virtual Digital Transaction Reporting?

Not every person who owns or trades crypto assets automatically has the same reporting obligation. The reporting requirement under Section 285BAA applies to prescribed reporting entities in respect of specified crypto-asset transactions.

The service may be relevant to:

• Crypto-asset exchanges covered by reporting rules
• Businesses involved in specified digital-asset transactions
• Entities required to furnish information to the Income Tax Department
• Reporting entities that need help organising transaction records
• Businesses reviewing their crypto-asset compliance processes

The applicable obligation should be checked based on the entity's activities, transaction type and the rules applicable for the relevant period.

What Information Is Considered for Reporting?

Accurate transaction data is important when preparing a digital transaction report. Depending on the applicable reporting requirement, information may include details about the transaction, parties involved, dates, values and other prescribed particulars.

A proper reporting process generally involves:

• Identifying transactions that fall within the applicable reporting provisions
• Collecting transaction records from relevant systems
• Checking taxpayer and transaction details
• Reviewing the information for completeness
• Preparing the required statement or report
• Filing the information through the prescribed reporting mechanism
• Maintaining supporting records for future reference

The specific information to be reported depends on the applicable form and rules. The Income Tax Department has also introduced reporting provisions specifically covering crypto-asset transactions.

Crypto Tax Reporting and VDA Compliance

Virtual digital assets have specific tax provisions in India. The Income Tax Department states that income from the transfer of virtual digital assets is subject to tax under Section 115BBH, while Section 194S provides for TDS on certain VDA transfers.

These tax provisions are different from the separate reporting obligation applicable to prescribed reporting entities. Therefore, businesses should distinguish between:

VDA Income Reporting

A taxpayer may need to disclose income from VDA transactions in the applicable income tax return. The Income Tax Department provides a separate Schedule VDA in ITR-2 and ITR-3 for reporting VDA income transaction-wise.

TDS Compliance on VDA Transfers

Section 194S contains provisions for TDS on certain transfers of virtual digital assets. For transactions covered under the earlier provisions, Form 26QE was used for TDS on VDA transfers. For events occurring on or after 1 April 2026, the Income Tax Department states that the new tax regime applies, including the prescribed challan-cum-TDS statement mechanism.

Crypto-Asset Transaction Reporting

Section 285BAA separately provides for information reporting on crypto-asset transactions by prescribed reporting entities. This means transaction reporting should be considered independently from an individual's or business's own income tax disclosure and TDS obligations.

How Virtual Digital Transaction Reporting Works

The reporting process should begin with identifying whether the entity is covered by the applicable reporting provisions. Once this is established, relevant transaction information can be collected and reviewed.

1. Identify the Reporting Requirement

The first step is to determine whether the entity qualifies as a prescribed reporting entity and which crypto-asset transactions are covered.

2. Collect Transaction Data

Transaction records should be gathered from exchange accounts, internal accounting systems and other relevant sources. The information should be sufficiently detailed to support the required reporting.

3. Verify the Data

Transaction values, dates, taxpayer details and other required particulars should be checked for consistency. Missing or inconsistent information can create problems during reporting.

4. Prepare the Statement

The applicable statement or prescribed form is prepared using the information required under the relevant rules. The Income Tax Department's 2026 rules include a new form for furnishing information on crypto-asset transactions.

5. Submit the Report

The completed information is submitted through the prescribed income-tax reporting mechanism within the applicable timeline.

6. Maintain Records

Copies of submitted statements and supporting transaction records should be retained so that the entity can respond appropriately if clarification or correction is required later.

Why Accurate Digital Transaction Reporting Matters

Crypto transactions can involve multiple trades, transfers, wallets and platforms. Keeping transaction information organised makes it easier to identify the relevant reporting requirements and prepare accurate information.

Professional assistance can help with:

• Reviewing transaction records
• Identifying relevant reporting requirements
• Organising supporting information
• Checking data before submission
• Understanding the relationship between reporting and tax compliance
• Addressing reporting discrepancies where applicable

The Income Tax Department also provides procedures for reporting entities and electronic filing of prescribed statements. Etds

Virtual Digital Transaction Reporting with My Startup Solution

My Startup Solution provides assistance for businesses that need help understanding and managing their virtual digital transaction reporting requirements. The work can include reviewing available transaction data, identifying relevant compliance requirements and supporting the preparation of applicable reporting information.

The exact scope depends on the entity, transaction structure and reporting rules applicable to the relevant financial year. This helps keep the reporting process aligned with the requirements rather than applying the same approach to every business.

Documents and Information Generally Required

The information required can vary depending on the reporting obligation. Common records may include:

• PAN and entity details
• Details of the reporting entity
• Crypto-asset transaction records
• Exchange or platform statements
• Transaction dates and values
• Details of relevant parties
• TDS or tax payment information, where applicable
• Previous reporting records, if relevant

The final document list should be confirmed after reviewing the nature of the entity and the transactions involved.

Get Assistance With Digital Transaction Reporting

Virtual Digital Transaction Reporting requires accurate transaction information and an understanding of the reporting provisions applicable to the entity. Professional assistance can help businesses organise records, review the applicable requirements and prepare the required information for submission.

My Startup Solution can help you assess the reporting requirements applicable to your business and support the reporting process based on the relevant rules and transaction records.