India’s tax authorities intensified their crackdown on cryptocurrency traders using offshore exchanges like Binance. According to The Economic Times, the focus is on individuals who failed to comply with the mandatory 1% Tax Deducted at Source (TDS) applied to crypto transactions in India.
India’s crypto tax regulations require a 1% TDS be levied on every applicable crypto transaction. While domestic Indian exchanges implemented this requirement, reports indicate many users moved to offshore platforms like Binance specifically to bypass it. Tax authorities now target these users directly, taking stricter measures against non-compliance.
Tax on Turnover, Not Just Profits
Crypto traders are facing unexpected tax burdens based on how authorities apply taxes. Instead of taxing only profits, officials reportedly impose a flat 30% tax on the entire trading turnover (total transaction value).
For instance, a trader generating ₹10 lakh in profits from ₹100 lakh in total trades might still face a tax assessment of ₹30 lakh under this punitive calculation. This strict measure serves as both a penalty for non-compliance and as a deterrent against using platforms that do not adhere to Indian tax laws.
This strict measure serves as both a penalty for non-compliance and a potential deterrent against using platforms that do not adhere to Indian tax laws.
Related: India’s Taxman To Get Sweeping Digital Surveillance Authority
Why Are Binance Users Specifically Targeted?
Binance is not currently registered as a reporting entity in India. It has not enforced the required TDS collection on its platform for Indian users, placing its users at risk of regulatory action.
Authorities reportedly use banking data and international cooperation agreements to track non-compliant traders. Those placed under investigation must provide proof of TDS payment for their transactions or justify why the rule does not apply to their specific circumstances.
Notably, registered Indian exchanges like WazirX and CoinSwitch automatically deduct the 1% TDS from applicable trades before processing them. In contrast, Binance facilitates peer-to-peer (P2P) trading options, where users might more easily overlook their individual TDS reporting obligations.
Under Indian law, both parties in a foreign exchange crypto swap must pay the 1% TDS. Traders are now advised to comply fully to avoid financial penalties, even when using foreign exchanges.
Related: ByBit Registers in India, Eyes Return After Paying $1M+ Fine
The crackdown extends beyond individual traders to include non-resident Indians (NRIs) who moved assets from local to foreign exchanges in the past two years. Indian authorities have also tightened restrictions on crypto withdrawals to curb potential money laundering and other illicit activities.
Stricter enforcement overall could deter traders from using non-compliant offshore platforms, pushing more activity toward domestic registered exchanges that automatically comply with local tax deduction and reporting laws.
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
