India launches major probe into 400 Binance traders accused of crypto tax evasion, signaling tougher enforcement against offshore trading activity.
Indian tax authorities have initiated a major tax evasion probe. They are investigating more than 400 high-net-worth Binance traders. These people are alleged to have avoided the relatively high crypto taxation in India. The tax dodging was done as they traded on the world’s largest cryptocurrency exchange. This large study is a sign of a serious regulatory emphasis.
The traders are suspected of non-taxation of profit. These trades were made between the fiscal years 2022-23 and 2024-25. The request for action came from India’s Central Board of Direct Taxes. Specifically, they wrote to departments in other cities and requested that they report their progress. They placed an internal deadline of October 17 for these reports.
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At least 400 high-profile people all over India are targeted. The tax authorities will now be ready to bring these citizens to light. They are said to be actively engaged in concealing their crypto transactions. As such, many did not reveal digital coins owned in foreign wallets. This helped them evade major local taxation.
Many HNW individuals used offshore services such as Binance. They had the misconception that they could get away from crushing taxes. The total tax on crypto profits is very high in India. The general range of the weight is from 33% to 38%. Under the previous tax regime it was as much as 42%.
This high rate comes with a compulsory 1% Tax Deducted at Source (TDS). This 1% TDS is charged on each crypto sale transaction. As a result, tax burden is one of the highest in the world. This huge tax burden encouraged traders to scour off-shore avoidance schemes.
A common way that it was done was through stablecoins like USDT. An individual could purchase USDT locally. Then they distribute this digital asset via the decentralized network. The money was transferred to an electronic wallet opened in Binance overseas. Then, the USDT could be sold or exchanged for assets such as Bitcoin.
USDT is seen as a popular medium to purchase other cryptocurrencies. The trader can sell the purchased Bitcoin for profit. They could then use the profit to purchase more stablecoins. This complicated process can have multiple layers of cryptocurrency exchanges. Thus, most trades involve crypto-for-crypto exchanges and not cash exchanges.
An imprudent investor may get caught in a grey area. They usually avoid paying taxes without knowing the law. As an example, Binance is a platform where traders can trade one crypto for another. Furthermore, this complicated on-chain transaction will hide the taxable event locally. This is one of the known grey areas in crypto tax evasion.
Siddharth Banwat, Mumbai-based Chartered Accountant, said: He pointed out that the tax department has the power to issue summons. Therefore, they can ensure proper reporting by the taxpayer. This is important at the time of filing the income return.
In addition, he provided a direction of remedial action. If taxpayers took an aggressive position, there are some options. They can correct the situation by lodging a revised return. However, this solution would have an additional tax cost. This option allows one last opportunity for compliance.
Ultimately, Indian authorities recognise the fact that transactions are multi-layered. Many digital transactions are run purely on-chain. They are not directly converted to fiat currency cash. Ultimately, the focus of this probe is India’s zero-tolerance approach. In addition, it is aimed at wealthy individuals who are trying to use offshore platforms in order to evade tax responsibilities.
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