The Income Tax Department is preparing to take action against more than 400 high-net-worth individuals (HNIs) who allegedly concealed income from cryptocurrency trades conducted on Binance, the world’s largest digital asset exchange.
According to officials familiar with the matter, the Central Board of Direct Taxes (CBDT) has directed its investigation wings in multiple cities to furnish action-taken reports by October 17, marking one of the largest coordinated efforts against crypto tax evasion in India.
Offshore Trades, Onshore Trouble
Preliminary investigations suggest that the traders routed their crypto transactions through offshore exchanges like Binance to evade India’s steep taxation regime.
Between 2022-23 and 2024-25, many investors failed to disclose holdings in foreign crypto wallets or report profits from digital assets in their income tax returns.
FCRF Launches CCLP Program to Train India’s Next Generation of Cyber Law Practitioners
Under Indian law, crypto gains are subject to a 30% tax, plus applicable surcharges and cess, which can push the total burden to 38% or even 42% under the old tax regime. In addition, the government mandates a 1% Tax Deducted at Source (TDS) on every crypto transaction a rule that many traders sought to bypass by moving to unregulated offshore platforms.
Taxman’s Net Tightens
“The department is empowered to issue summons to verify if due reporting is being done while filing returns,” said a Mumbai-based chartered accountant.
He added that taxpayers who took “aggressive positions” by not disclosing income could still file updated returns, albeit with penalties and interest.
The move aligns with the government’s broader push to plug regulatory gaps in cross-border digital asset trading. In April 2023, India had requested major global exchanges to share KYC data of Indian users a step resisted by some foreign entities citing data protection and jurisdictional challenges.
Officials said the action on Binance-linked traders will likely include summons, income reassessments, and penalties under the Income Tax Act and Foreign Exchange Management Act (FEMA) provisions.
A Broader Warning to the Crypto Community
Experts view the crackdown as a signal that authorities are expanding surveillance from domestic platforms to global crypto ecosystems.
“Crypto investors can no longer assume anonymity when dealing with offshore exchanges,” said a senior tax official. “Blockchain trails, combined with international cooperation, are closing traditional loopholes in cross-border asset reporting.”
The investigation also underlines the government’s intent to treat digital assets like any other taxable commodity, reinforcing accountability under the Virtual Digital Asset (VDA) framework introduced in 2022.
