A TIOL analysis shows over 90% of India-linked crypto trading shifting to offshore platforms, exposing massive gaps in tax collection and raising concerns over enforcement limits.

New Delhi, 04 December 2025

India’s evolving crypto landscape is facing a staggering challenge, as a new report highlights the scale at which Indian users are shifting their digital asset trades to overseas platforms. Amid global efforts to integrate cryptocurrencies into formal financial systems, India’s tax regime is struggling to track activity conducted beyond its borders.

The latest study by the TIOL Knowledge Foundation, titled “Taxation of Digital Assets in India – A Data-Driven Assessment of India’s VDA Tax Regime and its Market Impact,” estimates that ₹4.88 lakh crore worth of crypto trades by Indian users moved offshore during FY24–25.

The findings align with earlier research by the Esya Centre, which had estimated offshore trades at around ₹2.63 lakh crore the previous year. Together, the data signals a persistent trend: although Indians continue to be active crypto participants, the majority of this activity is slipping outside India’s tax jurisdiction.

Stringent Tax Rules Sparked the Shift

TIOL attributes this offshore movement to the Finance Act 2022, which introduced a tough tax framework for virtual digital assets (VDAs):

• 30% flat tax on gains,
• No provision for offsetting losses,
• 1% TDS on every trade above a minimal threshold.

These rules were introduced to curb speculation and ensure better transaction reporting. Yet, revenues have remained far below expectations. Across FY22–23 and FY23–24, the government collected just ₹706 crore in capital-gains tax and ₹338 crore via TDS, despite substantial trading volumes by Indian users.

Offshore Platforms Dominate India-Linked Trading

To understand the full picture, TIOL analysed global exchange traffic, order book activity, and Binance’s rupee-based peer-to-peer (P2P) transactions. The findings reveal:

• Indian-compliant exchanges handled only ₹45,000 crore in trades during FY24–25.
• This makes up barely 8–10% of the total activity linked to Indian users.
• The remaining over 90%, worth ₹4.88 lakh crore, took place on offshore exchanges — many of which are blocked in India but accessed using VPNs.

Billions Lost in Tax Revenue

The offshore shift has resulted in massive tax leakages. Since July 2022:

• ₹11,000 crore+ in TDS that should have been collected has not been realized.
• In the most recent 12-month period alone, ₹4,877 crore of TDS went uncollected.
• Potential capital-gains tax losses amount to approximately ₹36,000 crore.

If traders continue using offshore routes, TIOL projects that ₹39.9 lakh crore worth of crypto trades could move abroad over the next five years, leading to an estimated ₹39,971 crore in unrecovered TDS by FY2030.

Earlier Studies Raised Similar Red Flags

• Esya Centre’s “Taxes and Takedowns” report showed that 92% of Indian crypto trading migrated offshore soon after the tax rules were announced, resulting in ₹3,493 crore in missing TDS.
• Its December 2024 update put offshore activity at ₹2.63 lakh crore, with total uncollected TDS surpassing ₹6,000 crore.
• A study by NALSAR University of Law reported a 97% drop in onshore trading volumes, estimating over ₹2,489 crore in potential revenue losses.

P2P Channels Fuel the Migration

Many Indian traders now prefer P2P platforms that enable direct transactions using UPI or bank transfers while relying on exchanges solely for escrow. Traffic from Indian users to blocked platforms has also rebounded, highlighting the challenges of current enforcement mechanisms.

TIOL Suggests Key Policy Changes

To plug these widening gaps, the report recommends:

• Amending Section 194S to hold both Indian and offshore exchanges accountable for deducting TDS for Indian users—even without handling the rupee leg.
• Aligning VDA taxation with norms for other asset classes.
• Strengthening annual reporting requirements for better oversight and revenue tracking.

As India seeks to balance innovation with regulation in the digital asset economy, the TIOL report calls attention to the urgent need for a more pragmatic and enforceable tax framework.