Introduction
The Central Board of Direct Taxes (CBDT) in India has issued Notification No. 97/2026 introducing significant changes effective 1 April 2026, particularly impacting cross-border investors and those involved in digital asset activity. Key shifts include the rollout of Form ITR-BN and amendments to Rule 332 via added Appendix IV, targeting how returns are handled in search and requisition cases (cases where tax authorities have searched premises or requisitioned documents). (incometax.gov.in)
What Are Form ITR-BN & Appendix IV?
- Form ITR-BN: A new form specifically for taxpayers whose assessments arise from search or requisition actions. This form replaces or supplements existing forms where enforced compliance has been initiated. (incometax.gov.in)
- Appendix IV to Rule 332: Detailed disclosure requirements have been added. Taxpayers must provide additional schedules/items in their ITR filings, aligned to information uncovered or sought during search/requisition procedures. This adds layers of transparency and documentation. (incometax.gov.in)
Practical Impacts for Cross-Border Taxpayers & Digital Asset Holders
- Foreign assets & digital currency exposure: Searches or requisitions often follow from undisclosed assets. New rules may lead to enhanced scrutiny of overseas securities, accounts, or activities involving central bank digital currencies. You’ll need proper documentation: contracts, valuations, transfer details.
- DTAA implications: If claiming treaty relief, India may now demand proof that aligns with disclosures in search/requisition cases. E.g., dividend withholding evidence or beneficial ownership.
- New filing burdens & disclosure risk: Even if no search has been initiated yet, the possibility means keeping meticulous books and retaining records—transaction logs, ownership documents—for at least the statutory period. Non-compliance could trigger severe penalties.
Action Steps & Strategies
- Document ownership, valuations, and transfers of foreign or digital assets rigorously. Maintain bank statements, wallet logs, invoices.
- If using credit/foreign tax claims, ensure consistency in disclosures and ensure treaty notifications or forms are maintained.
- Consult with a tax professional to see whether your situation warrants proactive disclosure. Sometimes voluntary compliance may mitigate audits.
Example Case
Scenario: A US-based crypto investor residing partly in India holds digital assets worth ₹2 crore overseas and has some transactions in India from overseas exchanges. A requisition order uncovers those wallet addresses but your return lacked full disclosure.
Under the new rules: You’d file ITR-BN, use Appendix IV to disclose all relevant foreign addresses, acquisition cost, current valuation, and transaction history. Failure could lead to enhanced assessment and penalties.
Conclusion
These amendments push toward greater disclosure and alignment between what authorities learn via search/requisition and what taxpayers report. For global Indian taxpayers, cross-border business owners, or those involved in digital finance—even minor lapses can be costly. Getting ahead involves sound record-keeping, treaty-aware structuring, and revisiting past returns if warranted.