More than 72% of India’s cryptocurrency trading activity migrated to offshore exchanges in FY25, underscoring growing stress within the domestic digital asset ecosystem and intensifying calls for tax and regulatory reform ahead of Union Budget 2026.
According to a recent industry analysis, nearly 72.66% of India’s total crypto trading volume—estimated at ₹51,252 crore during the year—was executed on overseas platforms rather than on Indian exchanges. The shift reflects the combined impact of high capital gains tax, restrictions on loss offsetting and the 1% tax deducted at source (TDS) imposed on each transaction.
The study draws on trading data reported by more than 6.7 lakh Indian users across both domestic and international crypto platforms during FY24–25. The aggregate trading volume covered by the dataset stood at ₹70,536 crore, capturing activity across spot, margin and futures segments.
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Despite increased enforcement and compliance measures, the migration offshore has continued. The period coincided with several global crypto exchanges initiating registration with India’s financial intelligence framework to resume servicing Indian users. However, compliance on registration has not translated into uniform tax deduction practices across platforms, contributing to regulatory arbitrage.
Within India, crypto exchanges are required to deduct 1% TDS on each sale transaction involving virtual digital assets. The threshold currently stands at ₹10,000 per year for most taxpayers and ₹50,000 for small traders and specified categories. While the measure was intended to improve traceability and curb speculative excesses, traders argue it has significantly reduced liquidity and increased transaction costs.
Total TDS collected from crypto transactions during FY25 stood at ₹511.83 crore. Of this, users covered in the dataset contributed over ₹130.16 crore, accounting for roughly a quarter of total collections. Notably, less than 5% of users were responsible for nearly 87% of the total TDS paid, highlighting the concentration of trading activity among a small segment of high-frequency traders.
The report also reveals a disconnect between trading volumes and tax collections. The 1% TDS amounted to only about 0.60% of overall turnover on domestic exchanges, largely because a substantial share of trading shifted offshore, where TDS application has been inconsistent.
On the profitability front, Indian crypto traders reported mixed outcomes. Aggregate profits from crypto trades during FY24–25 stood at ₹6,394 crore, while total losses amounted to ₹4,781 crore. However, nearly half of the users still ended up paying tax despite being net loss-makers.
Approximately 49.09% of traders paid close to ₹180 crore in capital gains tax at the prevailing 30% rate, even though their combined net capital losses stood at around ₹1,178 crore. This outcome stems from the current tax framework, which does not permit losses from virtual digital assets to be offset against gains from other assets or carried forward.
Industry participants argue that this asymmetry has distorted trading behaviour, discouraging activity on compliant domestic platforms while pushing users towards global exchanges offering greater flexibility and lower friction.
Ahead of Budget 2026, the crypto industry has renewed demands for rationalisation of the tax regime. Key proposals include reducing the 30% flat capital gains tax, allowing loss offsetting within the asset class, and revisiting the 1% TDS rate, which traders say acts as a de facto transaction tax rather than a revenue measure.
The findings also raise broader policy questions. With a majority of trading activity moving offshore, authorities risk losing visibility into transactions, undermining the very objective of enhanced monitoring that the TDS framework sought to achieve. At the same time, domestic exchanges face shrinking volumes, threatening innovation and employment in India’s Web3 ecosystem.
As global competition for digital asset leadership intensifies, analysts warn that prolonged policy rigidity could weaken India’s position in the evolving crypto economy. The coming Budget is therefore being closely watched as a potential inflection point—either to recalibrate regulations and bring volumes back onshore, or to reinforce trends that continue to push Indian traders beyond domestic markets.
About the author – Rehan Khan is a law student and legal journalist with a keen interest in cybercrime, digital fraud, and emerging technology laws. He writes on the intersection of law, cybersecurity, and online safety, focusing on developments that impact individuals and institutions in India.
