India Intensifies Crackdown on Unreported Cryptocurrency Trades via Binance

India’s Income Tax Department has launched a nationwide investigation aimed at identifying unreported cryptocurrency transactions conducted through Binance, the world’s largest cryptocurrency exchange. As reported by The Economic Times on October 11, the Central Board of Direct Taxes (CBDT) has instructed regional investigative units to submit detailed reports by October 17.

Early findings indicate that more than 400 high-net-worth individuals (HNIs) failed to declare cryptocurrency profits between 2022 and 2025. Authorities suspect these individuals leveraged overseas platforms, including Binance, to sidestep India’s rigorous tax obligations on digital asset transactions.

The Role of India's High Tax Regime in Offshore Crypto Evasion

India's taxation policy on cryptocurrencies is one of the most stringent globally, imposing a 1% Tax Deducted at Source (TDS) on all digital asset transactions and a capital gains tax of up to 42% on profits. These steep tax rates have driven a notable segment of investors toward foreign exchanges to avoid local tax liabilities.

The investigation has further uncovered the extensive adoption of peer-to-peer (P2P) trading mechanisms using domestic channels like local bank accounts, Google Pay, and even cash transactions. These methods have reportedly been used to stay off the radar of tax authorities, making it harder for officials to trace and regulate such dealings within the country's jurisdiction.

Intensified Oversight of Digital Asset Tax Compliance

Tax experts interpret this sweeping investigation as a clear sign of heightened scrutiny and enforcement in India’s digital asset market. The government is carefully evaluating transaction data from prominent cryptocurrency exchanges to identify irregularities and instances of undeclared income.

According to Siddharth Bhanot, an accountant based in Mumbai, the tax authorities may summon individuals suspected of concealing cryptocurrency earnings to clarify their tax declarations. “Unreported income can be rectified through amended tax filings, but violators risk penalties,” Bhanot explained.

Tax advisor Ashish Karundia emphasized the high stakes for non-compliance. “Failure to accurately disclose cryptocurrency earnings and holdings could result in income reassessment or even comprehensive tax audits. The penalties are especially severe for undeclared foreign assets, as they fall under India’s Black Money Act. Violators under this act can face enormous fines or criminal charges,” he cautioned.

Toward a Regulated Ecosystem for Cryptocurrencies?

India’s robust investigative approach reflects a broader effort to enforce stronger tax compliance within its rapidly expanding cryptocurrency landscape. By analyzing transaction data from major exchanges and cracking down on individuals using international platforms to bypass domestic laws, the government aims to close existing tax loopholes while safeguarding national revenues.

This intensified focus on compliance signals the advent of a stricter regulatory environment for cryptocurrency traders and investors in India. The move not only reaffirms the government’s commitment to digital asset regulation but also underscores the importance of aligning cryptocurrency activities with the nation’s broader financial and legal framework.