New TIOL research shows over 90% of India-linked crypto trades moving to offshore platforms, causing a steep fall in domestic exchange volumes and major tax revenue losses.
New Delhi, 04 December 2025
As global economies refine their crypto regulations, India is confronted with an alarming trend: a vast majority of its crypto trading activity is happening beyond the government’s regulatory and tax reach. A new report by the TIOL Knowledge Foundation reveals that Indian users shifted nearly ₹4.88 lakh crore worth of virtual digital asset (VDA) trades to offshore platforms in FY24–25.
The study, titled “Taxation of Digital Assets in India – A Data-Driven Assessment of India’s VDA Tax Regime and its Market Impact,” suggests a rapid and sustained migration away from domestic exchanges. Its findings align closely with data from the Esya Centre, which had earlier estimated offshore crypto activity by Indian users at ₹2.63 lakh crore.
How Tax Rules Sparked the Offshore Shift
TIOL attributes this trend primarily to the Finance Act 2022, which introduced:
- a 30% flat tax on VDA gains,
- a ban on loss set-offs, and
- 1% TDS on every trade above a small threshold.
These measures were intended to curb speculative trading and enhance data visibility. However, actual tax collections remained significantly low—just ₹706 crore in capital gains tax and ₹338 crore in TDS between FY22 and FY24.
Indian Crypto Activity Reconstructed
The report uses global exchange data—from web traffic patterns and order-book snapshots to Binance’s rupee P2P desk—to map out India-linked trading. It finds that:
- Indian-compliant exchanges processed only ₹45,000 crore in FY24–25.
- This represents a mere 8–10% of total India-linked volume.
- Over 90% of Indian users’ trading, worth nearly ₹4.88 lakh crore, took place via offshore platforms, some of which are officially blocked but still accessed through VPNs.
A Growing Tax Revenue Black Hole
TIOL estimates that since July 2022, India has lost more than ₹11,000 crore in TDS that should have been collected on offshore crypto trades. In the latest 12-month period alone, the missing TDS is pegged at ₹4,877 crore, while potential losses in capital gains tax reach ₹36,000 crore.
If current patterns remain unchanged, offshore trades could near ₹39.9 lakh crore over the next five years—leading to a projected TDS loss of nearly ₹39,971 crore by FY2030.
Previous Studies Echo the Same Trend
- Esya Centre’s earlier “Taxes and Takedowns” study found that after India announced its VDA tax regime, 92% of crypto trading by Indians moved offshore, resulting in ₹3,493 crore in missing TDS.
- A December 2024 update pushed offshore trade estimates to ₹2.63 lakh crore, taking uncollected TDS past ₹6,000 crore.
- A NALSAR University study observed a 97% drop in domestic trading volumes and potential tax losses of around ₹2,489 crore.
P2P Channels Rising; Enforcement Falling Short
Much of the shift has moved toward peer-to-peer (P2P) networks, where payments occur via UPI or bank transfer while exchanges only hold crypto in escrow. Additionally, TIOL notes a resurgence in traffic to blocked crypto websites from Indian IP addresses, revealing gaps in enforcement.
TIOL’s Recommendations for Course Correction
To plug the widening tax gap, TIOL proposes:
- Amending Section 194S to make both domestic and offshore exchanges liable for TDS on trades by Indian users—even if the rupee component is not handled.
- Standardising VDA taxation with other asset classes.
- Tightening annual reporting obligations to strengthen oversight and revenue tracking.
With crypto adoption on the rise globally, the report signals a crucial warning for policymakers: without a more practical tax regime and stronger compliance mechanisms, India may continue to lose a substantial portion of its crypto economy—and revenue—offshore.
