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Trading on Binance, Coinbase, Kraken, or any foreign exchange creates several compliance obligations beyond just income tax:
Digital economy · Crypto
Foreign crypto exchange: reporting, FEMA, and the Sec 68 trap
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Provisions
IT Act, Sec 194 (old 115BBH) | FEMA 1999 | Schedule FA | Black Money Act 2015
Analysis
Schedule FA disclosure: If you hold crypto on a foreign exchange, it may constitute a "foreign asset", particularly if the exchange is foreign and holds the asset in custody. Non-disclosure = ₹10L penalty under Black Money Act. FEMA: Sending INR to a foreign exchange to buy crypto constitutes an outward remittance, must be within LRS limit (₹7Cr per year for current limit). Moving crypto gains back to India requires proper documentation of source. Sec 102, Income-tax Act 2025 (old Sec 68) risk: Crypto profits from foreign exchange credited to your Indian bank account without clear source documentation = unexplained cash credit = 78% effective tax.
Close
- Maintain full transaction history from all foreign exchanges, CSV exports, quarterly
- When repatriating to India: FIRC from bank showing foreign source of funds
- Declare in Schedule FA if you hold assets on foreign custodial exchange
- Check if foreign exchange reports to Indian authorities, some do under bilateral agreements
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