Indian tax authorities have launched a sweeping investigation into more than 400 high‑net‑worth individuals accused of hiding crypto profits through Binance, the world’s largest cryptocurrency exchange. The probe, reported by The Economic Times, marks one of the country’s toughest crackdowns on digital asset tax evasion to date.
According to the report, the Central Board of Direct Taxes (CBDT) has directed local income tax departments across several major cities, including Mumbai, Delhi, and Bengaluru, to submit progress updates by October 17. Officials suspect that many traders failed to declare income generated through crypto transactions between fiscal years 2022‑23 and 2024‑25, potentially amounting to tens of millions of dollars in unpaid taxes.
A warning for India’s wealthy crypto investors
India enforces among the world’s most stringent tax rules for digital assets. All crypto gains face a flat 30% tax, and every transfer incurs a 1% tax deducted at source (TDS) that must be paid upfront. When combined with surcharges and a 4% cess, the effective rate for the highest earners can approach 42.7%.
Despite these heavy obligations, officials believe a significant number of wealthy traders attempted to avoid tax reporting requirements by executing trades through foreign or peer‑to‑peer platforms. Many allegedly relied on Binance’s P2P service to buy and sell crypto directly with other users, often settling payments through Indian bank accounts or digital wallets like Google Pay. While Binance discontinued cash settlements in India last year, the earlier transactions have come under scrutiny in this latest round of inquiries.
Binance re‑enters India as compliance framework tightens
India banned Binance and eight other foreign exchanges in late 2023 after the Financial Intelligence Unit (FIU) accused them of operating without meeting obligations under the Prevention of Money Laundering Act (PMLA). Binance re‑entered the market in August 2024, following a $2.25 million settlement and formal registration as a “reporting entity” with the FIU.
That registration is proving pivotal for enforcement. Once listed as a reporting entity, Binance is required to share user data with Indian regulators when requested. The Economic Times report suggests this cooperation has helped investigators trace traders who failed to disclose crypto income during earlier years.
A senior official cited by the publication said that the exchange’s registration “paved the way for greater transparency” and marked “a shift toward accountability across crypto platforms.”
🚨 BREAKING: 🇮🇳 Indian Tax Dept targets 400+ wealthy individuals for hiding crypto profits on offshore Binance wallets.
— Crypto India (@CryptooIndia) October 12, 2025
- CBDT orders probe reports by Oct 17
- Traders failed to disclose digital assets held abroad
- Binance’s FIU registration helped authorities trace hidden… pic.twitter.com/COWs4uApOv
India’s expanding digital enforcement strategy
The current probe builds on an escalating pattern of enforcement. According to government data, Indian tax authorities discovered more than $120 million in undeclared crypto holdings during the 2024‑25 fiscal year. Analysts say the latest campaign highlights a maturing tax enforcement infrastructure capable of tracking decentralized transactions that were once believed to be untraceable.
Legal experts note that traders found guilty of evading taxes could face steep penalties, including fines up to 300% of the unpaid amount under the Black Money (Undisclosed Foreign Income and Assets) Act, and potentially criminal prosecution.
“The era of assuming crypto trades go unnoticed is ending,” said Mumbai‑based tax consultant Siddharth Banwat. “Now that exchanges are required to share user data, authorities can link transaction histories with individual taxpayer records.”
A Balancing act for India’s crypto policy
While enforcement intensifies, India continues to explore its own state‑backed digital currency. Union Minister Piyush Goyal recently reaffirmed the government’s plans to expand the central bank digital currency (CBDC) initiative while maintaining high tax rates for privately issued cryptocurrencies.
This dual approach reflects India’s stance that digital innovation should proceed under tight regulatory and fiscal control. The country’s crypto user base remains one of the world’s largest, with over 100 million estimated holders. Despite the heavy tax regime, India topped the Global Crypto Adoption Index, signaling that grassroots interest in digital assets remains strong.
Binance faces broader market challenges
Beyond India, Binance has faced regulatory and operational hurdles worldwide, including ongoing efforts to address compliance gaps and compensate traders impacted by market depegs. Industry analysts believe the outcome of the Indian probe could influence Binance’s regulatory relationships in other jurisdictions as well.
For now, the investigation underscores India’s growing capability to synchronize financial oversight with technological enforcement, signaling a future where crypto anonymity may no longer shield investors from the tax net.
Gunel Ismayilova
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