October 12, 2025

India is turning up the heat on crypto tax evaders! Over 400 wealthy Indians are in the crosshairs of tax officials for hiding profits made on Binance, the world’s biggest cryptocurrency platform. These traders parked their digital coins in overseas wallets and didn’t tell the taxman, thinking they could dodge heavy taxes. But now, the Income Tax department is tracking every hidden move. The Central Board of Direct Taxes (CBDT) called on India’s investigation wings in various cities to report by October 17 on their actions. Why the crackdown? Many traders believed the high tax rates on crypto earnings - which can be 33% to over 40% - were avoidable by using offshore exchanges like Binance. But the tax department says, "No more hiding!" Chartered accountant Siddharth Banwat explains, "The tax department is empowered to issue summons to confirm if due reporting is being done while filing return of income by the taxpayer. If taxpayers had taken an aggressive position and not reported the income, the option to rectify through filing of updated return would be available at an extra tax cost." How do traders make it tricky? They buy stable coins like USDT, swap them for other cryptos like Bitcoin or Ethereum, and do multi-layered transactions. Profits are often converted between different digital coins rather than cashed out, making it hard to track. Some even move money abroad through banks under RBI’s Liberalised Remittance Scheme (LRS), without disclosing crypto dealings, violating tax rules. What many didn’t know: Binance has registered itself as a reporting entity with India’s Financial Intelligence Unit (FIU). This means the crypto giant shares transaction info with Indian authorities, exposing undeclared trades. Also, tax officers are probing peer-to-peer (P2P) trades on Binance where buyers and sellers settle payments directly via Indian bank accounts or apps like G-pay. Earlier, cash was used but that route has stopped. According to CA Ashish Karundia, "Clearly, the veil of anonymity that once shielded VDAs is falling apart. With transactional data from crypto exchanges now feeding into the broader compliance framework, the tax department is better equipped to identify mismatches and trace unreported income. Additionally, the inclusion of VDAs in the ambit of 'undisclosed income' during search proceedings and classification as 'property' under Section 56(2)(x) marks a firm regulatory pivot. Taxpayers engaged in crypto transactions must now exercise heightened diligence. Failure to report VDAs accurately may trigger reassessment or scrutiny, with potential penalties under Section 270A. More critically, omission from Schedule FA could attract the harsh Black Money Act, hefty fines and even prosecution. So, they should undertake a comprehensive reconciliation of their VDA activity and explore corrective mechanisms such as the updated return (ITR-U). Once enforcement actions intensifies, there may not be left with too many options." The message is clear - crypto traders in India must clean their books and pay up, or face serious consequences. The crypto party’s anonymity curtain is being pulled back — this is tax time, Bollywood style!

Read More at Economictimes →

Tags: Cryptocurrency tax evasion, Binance india, Income tax department, Crypto profits, Foreign assets, Tax investigation,