The landscape of cryptocurrency regulation in India is dynamics, with recent actions highlighting the government’s commitment to addressing tax evasion. Reports indicate that Indian authorities are focusing on investigating about 400 traders from Binance, a significant player in the crypto exchange market, due to concerns over potential crypto tax evasion.
Related Reading: The Future of Crypto in India: Navigating Regulatory Waters
Indian Government Scrutinizes Binance Traders
A recent investigative report from The Economic Times reveals that the Income Tax Department, operating under the Central Board of Direct Taxes (CBDT), has initiated a probe into approximately 400 high-net-worth individuals. These traders are suspected of concealing their crypto transactions on the Binance platform.
There are serious allegations against these individuals for evading taxes on profits made in the years 2022 to 2024, with claims suggesting they have not disclosed their investments held in various foreign exchange wallets. In India, the tax implications on cryptocurrency are stringent, where a 1% tax is levied on each sale, with total tax rates ranging from 33% to 38%, compounded by other applicable fees, leading to an effective tax rate nearing 42.7%.
Many affluent traders have exploited foreign exchanges like Binance to sidestep the rigorous tax regulations in India. Recent enforcement actions have exposed these activities, as reports indicate a considerable volume of transactions conducted through USDT, a widely used stablecoin, or traditional banking methods under the Liberalized Remittance Scheme managed by the Reserve Bank of India.
Despite facing a ban in 2023 due to non-compliance with anti-money laundering (AML) laws, Binance resumed operations in India after resolving regulatory issues, which included a hefty fine of $2 million. The exchange’s registration as a reporting entity allows it to collaborate with Indian authorities to monitor and share critical user information, significantly contributing to the current investigation.
In addition to trade profits, the IT Department is meticulously scrutinizing the peer-to-peer trading activities conducted via Binance. As per data from Statista, India’s crypto market looks promising, with revenue projections estimating a growth to $9.7 billion by 2025.
While India shows indications of being crypto-friendly, acknowledging digital assets as legitimate investments, it simultaneously exercises caution to safeguard consumer interests. A recent illustration of this cautious approach was seen when the Bombay Stock Exchange denied a public listing for a company intending to raise capital through crypto investments.
Current State of the Cryptocurrency Market
As of now, the overall valuation of the crypto market stands at $3.68 trillion, reflecting a modest recovery of 1.67% within the last day. The total daily trading volume has surged by an impressive 32.40%, amounting to around $400.72 billion.
