TLDR
- CBDT investigates 400 Binance traders for evading crypto taxes between 2022 and 2025.
- Binance re-entered India in 2024 after paying $2.25M and registering with FIU.
- Crypto gains taxed up to 42.7% for high-income Indian traders under current law.
- Probe examines Binance’s peer-to-peer trades using local payment systems.
Indian tax authorities are investigating over 400 high-net-worth Binance traders suspected of evading cryptocurrency taxes between 2022 and 2025. The Central Board of Direct Taxes (CBDT) has directed departments across major Indian cities to submit progress reports on enforcement actions by mid-October, signaling tighter scrutiny of crypto activity.
Scope of the Investigation and Timeline
According to a report from The Economic Times, the ongoing investigation focuses on wealthy traders who may have used Binance to hide taxable crypto profits. Officials suspect that several individuals used indirect trading methods or peer-to-peer transfers to conceal income.
The CBDT issued internal communications to tax departments nationwide, requesting updates on enforcement by October 17. Authorities are analyzing trading data, settlement records, and wallet movements from the 2022–23 to 2024–25 fiscal years. The goal is to detect concealed earnings and ensure compliance with India’s strict crypto tax structure.
Binance’s Regulatory Standing in India
Binance was banned from operating in India at the end of 2023, along with eight other foreign crypto exchanges. The Financial Intelligence Unit (FIU) accused these firms of failing to comply with the Prevention of Money Laundering Act and operating without proper authorization.
After nearly eight months, Binance resumed operations in August 2024 by paying a $2.25 million penalty and registering as a “reporting entity” with the FIU. This registration mandates information sharing with authorities and requires the exchange to monitor user activity. The Economic Times report noted that this step allowed the government to access detailed transaction data, supporting the ongoing probe into tax evasion.
India’s High Crypto Tax Burden and Compliance Issues
India’s taxation framework for digital assets remains one of the toughest globally. Every crypto transaction carries a 1% tax deducted at source, later credited against the trader’s annual tax liability. Additionally, profits from trading are taxed at 30%, with surcharges and a 4% cess that raise the effective rate to nearly 42.7% for high earners.
Due to these high taxes, several traders reportedly sought to avoid detection by using domestic payment systems. Investigators are now examining whether Binance users relied on bank transfers, Google Pay, or other local methods to conceal crypto-related income. Authorities suspect that these settlement techniques were used to bypass tax reporting obligations.
Peer-to-Peer Transactions and Broader Oversight
The investigation also extends to Binance’s peer-to-peer (P2P) trading network. Officials are reviewing past P2P transactions to determine if traders used local accounts or cash to settle trades. While Binance discontinued certain domestic payment options after discussions with regulators, earlier records are now under review.
Authorities are working with the FIU to trace these transfers and identify potential tax violations. The findings could lead to wider audits of other exchanges operating in India. Union Minister Piyush Goyal recently said that the government would continue promoting its central bank digital currency while maintaining strict taxation for private cryptocurrencies.
The ongoing Binance probe reflects India’s growing emphasis on enforcing compliance within the crypto sector. As scrutiny deepens, tax authorities may expand their investigations to ensure that all crypto traders adhere to reporting and payment rules.
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