Income Tax Department Said to Target Over 400 Wealthy Binance Traders in Major Tax Evasion Crackdown

The investigation wing of the Income Tax Department is probing more than 400 high-net-worth individuals for alleged tax evasion after trading on Binance, as per a report by The Economic Times. The operation, which is being led by the Central Board of Direct Taxes (CBDT) in several cities, is centred on potential non-disclosure of cryptocurrency trading profits between 2022-2023 and 2024-2025. Officials are examining whether traders used unofficial channels, including domestic bank transfers, Google Pay, and (previously) cash, to bypass India's stringent crypto tax rules. 

Authorities Examine P2P Trades to Trace Undisclosed Cryptocurrency Gains

A source aware of these developments told the publication that the primary focus of the investigation is Binance's peer-to-peer (P2P) platform, which enables users to exchange cryptocurrency assets directly with one another and settle transactions in rupees. Authorities suspect that several traders used this feature to conceal income and avoid paying the 30 percent tax on crypto profits, along with the mandatory 1 percent tax deducted at source (TDS) applicable on every transfer. Due to the coordinated efforts of the CBDT, tax departments from different cities have been required to submit comprehensive reports on their findings by October 17. 

The latest development follows Binance's re-entry into the market in August 2024 after it paid a $2.25 million (roughly Rs. 20 crore) penalty and registered with the Financial Intelligence Unit (FIU) under the Prevention of Money Laundering Act. Following the exchange's 2023 ban for noncompliance, this renewed registration gave Indian authorities access to user and transaction data.

Investigators now rely on this information to identify suspicious patterns and assess whether traders accurately declared their earnings. 

According to the report, this operation marks one of the most extensive enforcement actions in the digital asset space. High-value accounts are believed to be given preference by tax authorities, particularly those in the highest income bracket, where effective tax rates can reach 42.7 percent. 

The investigation highlights how the Income Tax Department is placing more and more emphasis on accountability and transparency in cryptocurrency trading as part of attempts to strengthen oversight and reduce tax evasion in the quickly growing industry. 

Meanwhile, Binance continues to face market-related challenges amidst volatility and recent stablecoin depegging. The exchange has reaffirmed its commitment to regulatory compliance and promised to reimburse impacted traders. However, the ongoing probe highlights the country's increasingly firm stance on crypto taxation, signalling a future of stricter monitoring and enforcement in the country's digital finance ecosystem.