Indian Tax Authorities Investigate Binance Users for TDS Compliance

Many Indian traders using the world’s largest crypto exchange, Binance, have been targeted by tax authorities. The Income Tax (I-T) department is investigating whether the 1% Tax Deducted at Source (TDS) on such transactions has been properly collected. Over the past few weeks, local investors have received notices from the tax office, requiring them to either provide proof of TDS deduction or submit documentary evidence explaining why TDS is not applicable to their transactions.

Under the 2022 budget provisions, income from cryptocurrencies is taxed at 30%, along with a 1% Tax Deducted at Source (TDS) on transactions. However, many traders have been found neglecting these rules, prompting the department to take action. Officials are using advanced technologies like data analytics and Non-Filer Monitoring Systems to identify tax evaders. Information is being gathered from social media, emails, and other digital platforms to track those who have hidden their crypto earnings or failed to pay the required taxes. Investigations are also underway to determine if Indian traders have transferred their crypto holdings to foreign platforms to avoid tax obligations.

Vikram Subburaj, founder & CEO of Giottus, commented, “Well, this was bound to happen sooner or later. Overseas exchanges that bypass the TDS requirements are putting Indian traders in a difficult position. If you want to serve investors in India, you should respect and follow the law of the land.”

With the proposed Income Tax Bill 2025, authorities will have greater access to digital records, making it easier to track crypto investments and transactions. The goal is clear: ensure that all crypto traders pay the taxes owed on their earnings. This scrutiny is part of a broader effort by the Indian government to tighten regulations around cryptocurrency trading and ensure that all tax obligations are met. The 1% TDS on crypto transactions was implemented to track and tax gains from digital assets, which have become increasingly popular among investors in recent years. The tax department's actions underscore the government's commitment to enforcing tax compliance in the rapidly evolving crypto market.

The notices sent to Binance users in India highlight the importance of maintaining accurate records and adhering to tax regulations. Investors who have used Binance for crypto transactions are advised to review their records and ensure that they have complied with the TDS requirements. Failure to do so could result in penalties or further scrutiny from the tax authorities. The scrutiny of Binance traders by Indian tax authorities is a significant development in the regulatory landscape for cryptocurrencies. It reflects the government's determination to bring the crypto market under the purview of existing tax laws and ensure that all transactions are properly taxed. This move is likely to have implications for other crypto exchanges and platforms operating in India, as they may also face increased scrutiny and regulatory pressure.

The investigation into TDS compliance on Binance transactions is a reminder of the importance of tax compliance in the crypto market. As the use of digital assets continues to grow, it is essential for investors to stay informed about their tax obligations and ensure that they are in full compliance with the law. The actions taken by the Indian tax authorities serve as a warning to crypto traders and exchanges alike, emphasizing the need for transparency and accountability in the crypto market.