New Delhi — India’s push to bring cryptocurrency transactions under a formal tax regime has yielded tangible results, with TDS collections from Virtual Digital Asset (VDA) transactions crossing the ₹1,000-crore mark within three financial years.
In a written reply to Parliament on Monday, the Finance Ministry said that since the introduction of the 1% TDS rule in July 2022 under Section 194S of the Income Tax Act, the collections have grown consistently year on year.
The measure was designed to curb tax evasion and create a transparent reporting trail for digital asset transactions, including cryptocurrencies and NFTs.
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Year-on-Year Growth Highlights Rising Compliance
Government data presented in Parliament shows a steady increase in collections:
Financial Year TDS Collected (₹ crore)
- FY 2022–23 221.27
- FY 2023–24 362.70
- FY 2024–25 511.83
- Total (3 years) 1,095.80
Maharashtra led all states with ₹293.40 crore in TDS collected during FY 2024–25, followed by Karnataka at ₹133.94 crore and Gujarat at ₹28.63 crore.
Other major contributors included Delhi (₹28.33 crore) and Rajasthan (₹15.48 crore), indicating significant trading activity in metropolitan and tech-driven regions.
Offshore Exchanges Under Scrutiny for Tax Violations
While domestic compliance has improved, the Finance Ministry flagged serious lapses among offshore crypto exchanges catering to Indian investors.
The Income Tax Department has initiated targeted enforcement drives against several such platforms that failed to adhere to TDS obligations under Section 194S.
According to the ministry’s data, three crypto exchanges were surveyed, exposing TDS violations worth ₹39.8 crore and undisclosed income of ₹125.79 crore.
Across the sector, aggressive search and survey operations have uncovered unreported income of ₹888.82 crore, underlining the scale of non-compliance in cross-border digital asset trading.
Government Intensifies Crackdown on Non-Compliant Platforms
Officials said that investigations are ongoing into exchanges suspected of routing transactions through foreign entities and unregulated wallets to avoid taxation.
The government has stepped up coordination between the Income Tax Department, the Enforcement Directorate (ED), and the Financial Intelligence Unit (FIU) to monitor high-value crypto movements and identify suspicious transactions.
Enforcement actions could include penalties, prosecution, and blocking of non-compliant offshore platforms, especially those serving Indian users without adhering to domestic tax laws.
Policy Impact: Regulated Yet Restrained Crypto Environment
The 1% TDS rule — widely debated since its introduction — has helped authorities track crypto trades more effectively. However, industry stakeholders argue that the rule has also reduced trading volumes on Indian exchanges as investors moved to offshore platforms.
Experts believe the surge in TDS collection still demonstrates growing compliance awareness and signals that the Indian crypto ecosystem is maturing under regulation.
An industry analyst noted, “The government’s steady tax receipts indicate that digital asset trading remains active despite tighter norms. The challenge now is to bring global exchanges under India’s compliance umbrella.”
Future of Crypto Regulation in India
With the total TDS exceeding ₹1,000 crore, the Finance Ministry said it remains committed to balancing innovation with regulatory oversight.
India’s approach — combining taxation, financial tracking, and selective enforcement — is likely to shape future policy frameworks for digital asset taxation and exchange licensing.
As crypto assets continue to evolve, experts say the focus will shift toward cross-border information sharing and integration with anti-money laundering systems to ensure transparency and investor protection.
