India Investigates 400 Wealthy Binance Traders for Tax Evasion

Indian tax authorities have launched a major investigation targeting over 400 wealthy cryptocurrency traders suspected of hiding profits made on Binance between 2022 and 2025. The probe marks one of India’s most aggressive enforcement actions against crypto tax evasion to date.

The Central Board of Direct Taxes (CBDT) ordered tax departments across multiple cities to submit progress reports by October 17, 2025, according to The Economic Times. Investigators suspect these high-net-worth individuals used Binance, the world’s largest crypto exchange, to avoid paying India’s steep crypto taxes.

One of the World’s Toughest Crypto Tax Systems

India operates one of the harshest tax regimes for cryptocurrency globally. Traders face a 1% tax deducted at source on every crypto transaction, plus a 30% tax on all profits. When you add surcharges and a 4% cess, the total tax burden reaches 42.7% for top earners.

This heavy taxation pushed many wealthy traders to offshore platforms like Binance. They believed trading on foreign exchanges would keep their crypto profits hidden from tax authorities. That assumption proved wrong.

How Binance’s Registration Exposed Hidden Trades

The key breakthrough came when Binance registered with India’s Financial Intelligence Unit (FIU) in August 2024. This registration happened after Binance paid a $2.25 million penalty for violating India’s Prevention of Money Laundering Act.

Before August 2024, Binance was completely banned in India. The exchange operated without proper compliance from late 2023 until it resolved issues with regulators. Once Binance became a registered reporting entity, it had to share user data with Indian authorities.

This data sharing opened the door for tax investigators to trace previously hidden wallets and transactions. The traders who thought their offshore activity was invisible suddenly became visible to tax authorities.

Following the Money Trail

Investigators are examining how traders settled their crypto deals. Many used peer-to-peer (P2P) transactions on Binance that were completed through Indian bank accounts, Google Pay, or even cash payments. While Binance discontinued cash settlements, authorities believe these methods helped traders hide taxable income during the investigation period.

Tax departments are reviewing trading records, settlement details, and wallet movements from fiscal years 2022-23 through 2024-25. The goal is to identify who failed to report digital assets held in foreign wallets and who avoided paying required taxes on crypto profits.

Penalties and Legal Consequences

The consequences for caught traders could be severe. Tax expert Ashish Karundia, founder of CA firm Ashish Karundia & Co., warns that failing to report virtual digital assets can trigger reassessment proceedings with penalties under Section 270A of India’s Income Tax Act.

More serious cases could fall under the Black Money Act, which brings heavy fines and possible criminal prosecution. The law treats undisclosed foreign assets harshly, with penalties up to 300% of the tax amount owed.

Mumbai-based chartered accountant Siddharth Banwat noted that taxpayers who didn’t report their crypto income can still file updated returns, though they’ll pay extra tax costs. However, once authorities escalate enforcement actions, options for voluntary compliance become limited.

India’s Broader Crypto Crackdown

This investigation isn’t happening in isolation. Indian tax authorities uncovered $124 million in hidden crypto assets during a $3.3 billion crackdown in fiscal year 2024-25. They found 1,089 crore rupees in undisclosed foreign crypto income and another 630 crore rupees ($72 million) in hidden domestic crypto income.

Despite these strict enforcement measures, India remains a major crypto market. The country topped the Global Crypto Adoption Index for two consecutive years, with an estimated 100 million Indians owning cryptocurrency. The crypto market in India is projected to reach $9.7 billion in revenue by 2025.

The government continues pushing its own central bank digital currency (CBDC) while maintaining high taxes on private cryptocurrencies. Union Minister Piyush Goyal recently confirmed the government plans to expand CBDC efforts while keeping crypto taxation at current levels.

The End of Crypto Anonymity

Tax authorities now have access to transaction data from cryptocurrency exchanges, eliminating gaps that previously let traders hide income. The shift from blocking foreign exchanges to requiring their registration and data sharing has proven effective for enforcement.

What started as 400 cases could expand further. Officials are reviewing whether to audit other exchanges operating in India to ensure all crypto traders follow reporting and payment rules.

The investigation sends a message: using offshore platforms doesn’t guarantee tax avoidance. With international cooperation increasing and exchanges required to share data, the days of hiding crypto profits are ending.