SEBI Issues Revised Guidelines for Intermediaries on FATCA and CRS Compliance under Income Tax Rules 2026

The Securities and Exchange Board of India (SEBI) has released revised circular guidelines instructing all registered intermediaries, stock exchanges, and depositories to update their compliance frameworks for the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS) [1]. Issued by Deputy General Manager Bhumika Kanojia on November 11, 2026, the directive aligns market participants with the updated regulatory requirements introduced by the Income-Tax Act, 2025 and the Income-Tax Rules, 2026 [1].

Transition to the 2026 Tax Framework

The new regulatory directive supersedes older compliance standards that were previously governed by the Income-Tax Act, 1961 and the Income-Tax Rules, 1962, alongside earlier SEBI circulars dating from 2015 and 2024 [1]. With the introduction of the Income Tax Act, 2025 and the Income Tax Rules, 2026, which took effect on April 1, 2026, automatic exchange of information (AEOI) reporting obligations have shifted [1]. Specifically, reporting requirements are now anchored in Section 508 of the Income Tax Act, 2025, read with Rules 238, 239, and 240, alongside Form 166 of the updated IT Rules [1].

Under Rule 239(12)(a) of the IT Rules, 2026, market regulators are mandated to issue precise guidelines to regulated financial entities [1]. These guidelines ensure that institutions incorporate proper due diligence procedures, maintain account information systematically, and fulfill their reporting duties seamlessly [1].

Obligations for Reporting Financial Institutions

Entities that qualify as Reporting Financial Institutions (RFIs) under Rule 238(8) and Rule 238(3) of the IT Rules, 2026, must ensure strict adherence to Rules 238 to 240 [1]. SEBI has advised all relevant intermediaries to consult the Guidance Note on FATCA and CRS issued by the Central Board of Direct Taxes, which was published on July 24, 2026 [1].

Intermediaries are required to embed AEOI reporting and due diligence measures directly into their customer onboarding and Know Your Customer (KYC) workflows [1]. This involves comprehensive updates across several operational systems:

• Self-certification collection procedures must now capture validity indicators [1].
• Controlling person identification systems need to accurately record specific roles such as settlors, trustees, protectors, beneficiaries, or other designations [1].
• Account classification systems are required to capture account types alongside pre-existing or new statuses [1].
• Form 166 XML generation software must be updated to include all new mandatory fields to prevent validation errors on the official Income Tax portal [1].

Furthermore, intermediaries must upload client-obtained FATCA and CRS certifications onto the systems operated by KYC Registration Agencies (KRAs) [1]. SEBI emphasized that the absolute onus for securing and reporting these certifications rests solely upon the respective intermediaries [1].

The updates follow the transition from the legacy Income-Tax Act of 1961 to the Income-Tax Act, 2025, and its associated 2026 rules, which overhaul India's automatic exchange of information frameworks for international tax compliance [1]. Financial intermediaries in India have historically maintained compliance under 2015 SEBI frameworks tied to the older tax rules [1].

For financial institutions and intermediaries operating within the Indian securities market, the circular mandates immediate technical and procedural upgrades to customer onboarding systems and XML generation software to prevent reporting failures [1]. Compliance is mandatory to maintain legal operations and support international tax transparency agreements [1].

Intermediaries may face administrative and software development costs as they reconfigure their KYC systems, self-certification collection flows, and XML generation tools to meet the new IT Rules, 2026 standards.

Failure to include mandatory fields in Form 166 XML generation software will result in validation errors on the Income Tax portal, potentially exposing intermediaries to regulatory scrutiny.