Key Points :
- Indian tax authorities are intensifying investigations into over 400 wealthy individuals suspected of hiding crypto profits via Binance.
- The probe targets the fiscal years 2022-23 through 2024-25, focusing on undeclared offshore wallets and P2P trades.
- India’s crypto tax regime is tough: 1% TDS on each transaction, plus ~30% profit tax (effective burden up to ~42 %).
- Binance’s registration with India’s FIU now enables data sharing with tax authorities, exposing previously hidden trades.
- Noncompliant traders may face reassessment, severe penalties, or prosecution under the Black Money Act.
- The crackdown signals a broader shift: crypto anonymity is fading, compliance is becoming inevitable.
1. Investigation Into Hidden Crypto Income Expands
Indian tax authorities have launched a sweeping crackdown on affluent individuals who allegedly concealed capital gains earned through cryptocurrency transactions on Binance, the world’s largest crypto exchange. More than 400 high-net-worth individuals are under scrutiny for evasion spanning fiscal years 2022-23 through 2024-25.
According to sources, the Central Board of Direct Taxes (CBDT) has directed regional tax offices to submit detailed progress reports by October 17, 2025. The authorities are focusing on how high-end traders may have used offshore wallets, undervalued transaction records, or P2P settlement routes to evade tax liability.
Investigators are analyzing logs of Binance wallet movements, cross-referencing with domestic banking and payment rails (like Google Pay), and scrutinizing peer-to-peer trades whose settlement flows passed through Indian accounts.
2. India’s Crypto Tax Regime: Rigorous and Punitive
India’s framework for taxing crypto assets is among the strictest globally. Every crypto sale is subject to a 1% tax deducted at source (TDS), which effectively acts as a withholding mechanism. Beyond that, profits from crypto trades are taxed at a flat 30% rate, and when surcharges and cess are added, the effective tax burden for high-income individuals may approach 42.7 %.
This high-tax environment is a central driver behind attempts by investors to shift their activity offshore or conceal profits. The 1% TDS is non-negotiable and non-refundable, making even small trades costly in tax terms.
Given this fiscal pressure, traders have sought routes through less transparent channels—such as offshore exchanges or peer-to-peer settlement systems—to avoid detection.
3. Binance Registration and Data Sharing Enable Enforcement
A pivotal turning point in the crackdown is Binance’s registration with India’s Financial Intelligence Unit (FIU) in August 2024 after being fined ~$2.25 million for AML violations. That registration effectively made Binance a “reporting entity,” bound to share user transaction data with Indian authorities.
Previously, many users believed that maintaining wallets on offshore exchanges provided a form of implicit anonymity. However, with data agreements now in place, those assumptions are no longer valid. As a result, tax authorities gained the ability to reconstruct trading histories, correlate wallets to user identities, and identify discrepancies in declared income.
This technical and legal capability transforms the regulatory landscape: hidden offshore trades can now be exposed.
4. Peer-to-Peer Trades and On-Chain Settlement Under Scrutiny
Another vector under examination is Binance’s P2P feature, which pairs domestic buyers and sellers and handles settlement through local banking, UPI, or Google Pay systems. Investigators suspect that some traders used these routes to mask the origin and destination of crypto profits.
Because Binance originally allowed cash-settled P2P trades (later discontinued), some trades may have escaped conventional banking trails. Payment rails like Google Pay or domestic bank transfers may form the final leg of trades that were initiated offshore, making it harder to trace without cross-referencing on-chain logs.
Tax authorities are now matching on-chain wallet flows and settlement data with internal bank records and payment networks to detect mismatches or undeclared income.
5. Penalties and Legal Risks for Noncompliance
For traders who fail to properly declare virtual digital asset (VDA) income, the consequences are severe. The Income Tax Act allows reassessment and scrutiny under Section 270A, with penalties for unduly low or incorrect reporting. Non-reporting of foreign wallets or omission from Schedule FA can trigger the Black Money (Undisclosed Foreign Income and Assets) Act, which carries heavy fines and even criminal prosecution.
Legal experts are warning taxpayers to reconcile any VDA activities, correct past filings, and file updated returns before enforcement intensifies. Once investigations reach full scale, voluntary compliance options may diminish.
In particularly egregious cases, prosecutions could follow, and fines could amount to multiples of the tax owed.
6. Broader Implications & Emerging Trends
This crackdown in India reflects broader trends in global crypto regulation. Across jurisdictions, governments are increasingly using data analytics, inter-exchange cooperation, and mandatory reporting frameworks to reduce opacity in crypto markets.
For example, in India alone, the income tax department reportedly collected around ₹437 crore (~ $52 million) in crypto-related tax recoveries using AI and analytics tools. Another recent probe revealed that some Indian exchanges may have been using client-deposited crypto for internal lending or trading (so-called “rehypothecation”) without profit sharing or disclosure.
Even at fintech summits in India, cryptocurrencies and stablecoins were conspicuously omitted from discussion, signaling regulatory caution. Meanwhile, India is preparing a foreign currency settlement system via GIFT City to streamline cross-border finance — a move that could further change how digital assets integrate with traditional capital flows.
On the regulatory front, India is reviewing its broader crypto stance in light of global developments, as cross-border coordination becomes more critical.
The Indian government is also encouraging major exchanges to register with the FIU; Coinbase, for instance, is reportedly reentering the Indian market following regulatory approval.
The upshot is clear: the era of “anonymous offshore trading” is losing ground. Exchanges must adapt to stricter data-sharing protocols, and traders must adjust to a regime where compliance, transparency, and on-chain auditability are the norm.
Conclusion
India’s aggressive tax enforcement against Binance users marks a pivotal moment in the global maturation of crypto regulation. What was once a realm of opaque offshore trades and hidden wallets is now subject to systemic scrutiny and data-driven policing. For traders, the message is clear: profits from crypto must be accurately reported, or the risks of reassessment, hefty penalties, and even legal action are real. For projects, platforms, and institutions, it underscores the importance of compliance layers, transparency, and integration with national regulatory systems.
As anonymity dissipates, the sustainable path forward lies in clear accounting, proactive disclosure, and a recognition that blockchain’s traceability is no longer a bug but a feature that tax and law enforcement agencies can leverage. In this evolving climate, those seeking new crypto opportunities must build responsibly, with compliance baked in — and not hope to hide in the shadows.
