Binance tax probe has recently put the spotlight on over 400 high-net-worth Indian crypto traders suspected of sidestepping India’s hefty cryptocurrency taxes. As the world’s largest cryptocurrency exchange, Binance finds itself at the center of this extensive investigation, conducted by Indian tax authorities to uncover potential tax evasion cases.
Indian Crypto Traders Under Scrutiny
The probe focuses on trades executed between 2022-23 and 2024-25. The Central Board of Direct Taxes in India has instructed various departments to provide their findings by October 17. These traders are believed to have evaded taxes, despite the stringent tax policies imposed on cryptocurrency transactions in India.
In India, crypto traders are subject to a 1% upfront withholding tax on each transaction, which is credited against the final tax bill. Additionally, profits from cryptocurrency trading are taxed at 30%, with surcharge and a 4% cess potentially raising the effective tax rate to approximately 42.7% for individuals in the highest tax bracket.
Government’s Stance on Cryptocurrency
The Indian government, represented by Union Minister Piyush Goyal, has reiterated its commitment to developing a central bank digital currency (CBDC). Despite this, the government maintains its high tax rates on cryptocurrencies not backed by the government, indicating a firm stance against non-official digital currencies.
Binance’s Challenging Journey in India
Binance’s operations in India have faced significant hurdles. In late 2023, the exchange was blocked alongside eight other platforms due to allegations of non-compliance with the Prevention of Money Laundering Act by India’s Financial Intelligence Unit (FIU). However, Binance re-entered the Indian market in August 2024 after settling a $2.25 million penalty and registering as a “reporting entity” with the FIU.
This registration has now paved the way for the ongoing tax probe, as Binance is required to share information about potential tax evaders with Indian authorities. The investigation is also looking into the use of peer-to-peer payments facilitated by Binance within India, which were settled using domestic bank accounts, Google Pay, or cash—though the cash option has since been discontinued.
Meanwhile, Binance is addressing other challenges such as compensating traders affected by depegs in various markets, amidst rising industry-wide liquidations.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
