India Demands $86 Million in Taxes from Binance

The Indian tax authority, DGGI, has issued a tax notice to Binance for $86 million, citing alleged violations of tax regulations. Binance reportedly earned over $476 million in transaction fees, which were transferred to a Seychelles-based entity of the Binance Group. The Indian government is expected to release a strategy paper on digital assets in September, crafted by an interministerial group with participation from the RBI and SEBI.

The notice, issued by the DGGI in Ahmedabad, is part of their crackdown on suspected tax violations. The allegations against Binance pertain to fees collected from Indian customers trading on Binance’s platform, covering the period from July 2017 to March 2024. While the DGGI has previously targeted Indian cryptocurrency exchanges, this marks the first instance of an international exchange being held accountable. The DGGI, under the Ministry of Finance, is responsible for gathering, compiling, and disseminating information on indirect tax evasion.

Binance Earned $476 Million in Fees

According to the Economic Times, Binance earned over $476 million (40 billion rupees) in transaction fees, which were transferred to Nest Services, a Binance Group entity based in Seychelles. The services offered by Binance fall under the category of Online Information and Database Access or Retrieval Services (OIDAR), which are provided and received online without physical interaction with the service provider. This classification aims to prevent foreign providers from having an unfair advantage over domestic ones.

It is important to note that notices do not always result in fines. For instance, earlier this month, the DGGI retracted some of its allegations against the Bengaluru-based tech giant Infosys after the company challenged the claims.

This development follows a fine of around $2.2 million imposed on Binance in June 2024 for offering services to Indian customers without complying with the country’s anti-money laundering regulations. The penalty was imposed after the Financial Intelligence Unit (FIU) granted Binance registration as a recognized entity. The ongoing DGGI investigations are independent of the FIU’s actions.

India to Publish New Crypto Regulations by September

The Indian government is set to publish a white paper outlining its policy on digital assets by September, according to Economic Affairs Secretary Ajay Seth in an interview with Moneycontrol. “The policy aims to consult relevant stakeholders, make public announcements, and indicate that there is a discussion paper addressing these issues, and then stakeholders will provide their feedback,” Seth explained.

Leading these regulatory considerations is an interministerial group comprising key institutions like the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). Seth noted that this group is developing a comprehensive policy for cryptocurrencies, with the discussion paper expected by September.

The RBI has previously expressed concerns about the potential risks of cryptocurrencies to macroeconomic stability, while SEBI has shown a more open stance towards regulatory oversight of digital assets. Despite the absence of a comprehensive legal framework, India currently imposes stringent tax measures on the cryptocurrency sector.

Recent mandates requiring registration with the Financial Intelligence Unit (FIU-IND) indicate a shift towards aligning with global standards for combating money laundering and terrorism financing, as established by organizations like the Financial Action Task Force (FATF).