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The Indian Income Tax Department has launched a nationwide investigation into over 400 wealthy individuals accused of hiding cryptocurrency profits on Binance between 2022-2023 and 2024-2025. Acting under directives from the Central Board of Direct Taxes (CBDT), tax officers across major cities have been asked to submit detailed reports by October 17. The probe seeks to uncover undeclared gains from virtual digital assets (VDAs) stored in offshore wallets.
Investigators revealed that many traders used several transaction layers to mask their crypto income. Typically, they purchased USDT, transferred it to Binance wallets, and exchanged it for Bitcoin or Ethereum. This process is often repeated, creating a cycle of buying, swapping, and selling across multiple coins without converting them into rupees.
Some investors feel that these crypto swaps went unnoticed since no cash exchange occurred. Others legally transferred money abroad through the Liberalised Remittance Scheme (LRS), which allows annual overseas investments of up to $250,000. Yet, many failed to disclose that their remitted funds were used for cryptocurrency purchases, violating the Schedule ‘Foreign Assets’ (FA) declaration in income tax filings.
Binance was banned in India in late 2023 alongside eight other offshore exchanges after the Financial Intelligence Unit (FIU) accused them of breaching the Prevention of Money Laundering Act. Many Indian traders believed the offshore platform could keep their transactions hidden.
However, Binance’s registration as a “reporting entity” with the FIU changed that perception. The status enabled the exchange to share detailed user and transaction data with Indian authorities. Consequently, Binance paid a $2.25 million fine and resumed operations in August 2024, giving investigators direct access to critical information.
The data access proved crucial for ongoing probes into peer-to-peer (P2P) transactions involving local bank accounts, Google Pay, and cash settlements. Although Binance later discontinued cash-based trades, officials believe these earlier methods helped conceal taxable income.
The tax authorities are now investigating a possible connection between confident investors and hawala networks that purchase digital assets outside formal banking systems. Although the Enforcement Directorate (ED) is yet to step in, it is closely investigating the issue, on the possibility of money laundering and foreign exchange.
Such a coordinated crackdown, enhanced by the cooperation of Binance with the FIU, predetermines the increased willingness of India to regulate the taxation of digital assets. Governments hope that the current probe will influence how rich investors will handle their offshore crypto assets.
Will this investigation finally dispel the old illusion of anonymity surrounding offshore crypto wealth?
In the other jurisdictions, Binance is still liable to investigations of token depegging incidents and technical failures. Nonetheless, the exchange has promised to offer compensation to users who were harmed, and it is maneuvering its way through a tide of international regulatory transformations and historic liquidations of the market.
India’s Income Tax Department has intensified its scrutiny of undeclared crypto assets, targeting 400 Binance users accused of concealing profits through offshore wallets. Acting under the CBDT’s direction, officials are investigating complex transaction layers and undisclosed foreign investments.
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