- Over 400 high-net-worth Binance users are under investigation for alleged crypto tax evasion between 2022 and 2025.
- Authorities are examining P2P transactions and unofficial settlements via banks, Google Pay, and previously cash.
- Binance re-entered India in 2024 after paying a fine and registering with the FIU, enabling data sharing for the probe.
Indian tax authorities have launched a widespread investigation into more than 400 high-net-worth individuals accused of crypto tax evasion after trading on Binance. The Central Board of Direct Taxes (CBDT) is spearheading the operation, which spans several Indian cities. This probe focuses on possible tax evasion during financial years 2022-23 to 2024-25.
Binance Traders Under Scrutiny
According to officials, these individuals allegedly failed to report profits made on Binance, the world’s largest cryptocurrency exchange. Under Indian law, crypto gains attract steep tax rates. Traders in the highest income bracket face an effective tax rate of around 42.7%, including a 30% tax on profits, surcharges, and a 4% cess. In addition, every crypto transfer incurs a 1% Tax Deducted at Source (TDS), which must be paid upfront.
Authorities believe several traders bypassed these taxes by routing transactions through unofficial channels. Some trades were reportedly settled through domestic bank accounts, Google Pay, and even cash, although Binance later discontinued the cash option.
National Agencies on Alert
The CBDT has directed tax departments across cities to submit action reports by October 17. This coordinated effort comes months after Binance re-entered the Indian market. In late 2023, the Financial Intelligence Unit (FIU) had blocked Binance and eight other crypto platforms for operating without compliance under the Prevention of Money Laundering Act.
Binance paid a $2.25 million penalty and registered as a reporting entity with the FIU in August 2024. This registration allowed Indian authorities to access internal data and identify suspicious trading activities involving domestic users. That access is now central to the current tax probe.
Data Sharing and P2P Payments Examined
Officials are examining Binance’s peer-to-peer (P2P) service, which allows users to conduct crypto transactions directly with each other. These trades were settled in Indian rupees using bank accounts or digital wallets, raising concerns over transparency and compliance. Authorities suspect these methods enabled users to avoid detection and underreport taxable gains.
While Binance’s cooperation helped reopen operations in India, the company now finds itself at the heart of a significant enforcement drive. Authorities are using the shared data to verify whether traders met tax obligations, especially those in higher income brackets.
Binance is also facing different problems as the investigation continues. Liquidations were recorded at high with recent depegs in some crypto markets. The exchange has promised to pay the affected users who have suffered losses in the event. The Indian regulators seem to be strict when it comes to tax compliance in crypto trading, which would signal an increase in control in the future.
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