SEBI directs market intermediaries to update KYC and tax-reporting systems under new rules
The regulator has asked reporting financial institutions to revise customer verification, account classification and reporting procedures to meet international disclosure requirements
The Securities and Exchange Board of India (SEBI) has instructed market intermediaries to update their KYC and tax-reporting systems to comply with new income tax rules, SEBI announced on Wednesday. The updated rules, introduced by the Income-tax Act, 2025 and Income-tax Rules, 2026, commenced on April 1, 2026. SEBI emphasized that market intermediaries, classified as Reporting Financial Institutions (RFI), must integrate Automatic Exchange of Information (AEOI) reporting and due diligence requirements into their customer onboarding and Know Your Customer (KYC) procedures.
The regulator has directed intermediaries to revise customer self-certification processes, identify controlling persons, and classify accounts into new and existing categories. SEBI also mandated intermediaries to update their reporting software to incorporate mandatory fields from Form 166 of the revised income tax rules. Non-compliance with these requirements may lead to validation errors on the Income Tax portal.
SEBI has directed market intermediaries to upload FATCA and CRS certifications acquired from clients to their KYC Registration Agencies (KRAs). The regulator has advised intermediaries to consult the Central Board of Direct Taxes' guidance note on FATCA and CRS for compliance with the revised rules, published on July 24, 2026.
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