India’s Crypto Tax Is Exploding: TDS Collections Jump 41% to ₹511.83 Crore in FY25
Maharashtra and Karnataka Dominate India’s Crypto TDS Collections as Government Tracking Tightens
India’s cryptocurrency market is once again in the spotlight as fresh data reveals a sharp rise in tax deducted at source (TDS) collections linked to digital asset transactions. The surge highlights not only growing participation in crypto trading but also the government’s increasingly sophisticated ability to monitor activity across the sector.
According to figures released by the Ministry of Finance, India’s crypto TDS collections jumped 41 percent year-on-year in the financial year 2024–25 (FY25), reaching ₹511.83 crore, or approximately $57 million. This compares with ₹362.70 crore, or $40.34 million, collected during the previous financial year.
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| Source: Hindustan Times |
The rise underscores how the 1 percent TDS levy on virtual digital asset transactions has become a key tool for authorities to track crypto trading in near real time. Introduced as part of India’s broader tax framework for digital assets, the mechanism is now offering policymakers clearer insight into where crypto activity is concentrated and how rapidly it is expanding.
Maharashtra and Karnataka Lead the Way
State-level data shows that Maharashtra-based cryptocurrency exchanges contributed the largest share of TDS collections in FY25. Exchanges registered in the state accounted for ₹293.40 crore in tax deductions, reflecting a 30.63 percent increase from the previous year.
Karnataka followed as the second-largest contributor, with ₹133.94 crore collected, marking a striking 63.4 percent year-on-year growth. The strong performance of these two states reflects their status as major hubs for technology, finance, and startup activity, which has translated into higher levels of digital asset trading.
Other states recorded smaller but still notable contributions. Gujarat reported ₹28.63 crore in crypto TDS, though this represented a modest decline of 2.3 percent compared with FY24. The national capital region, Delhi, ranked fourth, collecting ₹28.33 crore, a sharp rise from the previous year and signaling growing participation among traders and platforms registered in the capital.
It is important to note that these figures are based on where exchanges are legally registered rather than where individual trades physically occur. As a result, the data reflects corporate and compliance structures more than the geographic distribution of traders themselves.
How India’s Crypto Tax System Works
India’s current crypto tax framework took shape with the introduction of Section 194S in the Union Budget 2022–23. Under this provision, a 1 percent TDS is deducted on every transfer of a virtual digital asset. The primary objective is not revenue generation alone, but transaction tracking, allowing authorities to monitor trading activity and identify participants in the crypto ecosystem.
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| Source: indiabudget |
In addition to TDS, income earned from virtual digital assets is taxed at a flat rate of 30 percent, with no allowance for offsetting losses against other income. This structure has been widely debated within the industry, with critics arguing that it discourages active trading and innovation, while supporters say it brings much-needed transparency to a fast-growing sector.
Between FY23 and FY25, total crypto TDS collections in India have now crossed ₹1,096 crore, or roughly $122 million. The cumulative figure highlights both the scale of crypto participation and the effectiveness of the TDS mechanism in capturing transactional data.
Compliance and Enforcement Intensify
While most domestic exchanges have adapted to the TDS regime and built compliance mechanisms into their platforms, overseas crypto exchanges serving Indian users remain under increased scrutiny. Authorities have expressed concerns that some offshore platforms may not be fully adhering to India’s tax and reporting requirements.
The government has also stepped up enforcement efforts beyond income tax compliance. According to official disclosures, action has been taken against 18 digital asset exchanges over alleged goods and services tax (GST) evasion totaling more than ₹824 crore. In parallel, tax authorities have issued approximately 44,000 notices to individuals suspected of failing to report crypto-related income.
These measures signal a clear message from policymakers: while crypto trading is not illegal in India, it is firmly within the tax net. Regulators are increasingly focused on closing loopholes and ensuring that digital asset activity does not escape oversight.
Adoption Spreads Beyond Major Cities
India continues to rank as the world’s leading country in cryptocurrency adoption, a position reinforced by the latest tax data. What is particularly striking is how adoption has expanded beyond major metropolitan areas.
Recent studies show that Tier-2 cities now account for 32.2 percent of crypto users, while Tier-3 and Tier-4 cities together contribute 43.4 percent. This shift reflects broader digital penetration, improved internet access, and growing awareness of crypto as an alternative financial asset.
The rise in TDS collections is closely linked to this widening participation. As more users enter the ecosystem, even small-value transactions contribute to higher aggregate tax deductions. For policymakers, this trend offers valuable insight into how crypto usage is evolving across different segments of the population.
Belief in Digital Assets Despite Heavy Taxes
The continued growth of crypto participation in India has occurred despite the absence of a comprehensive regulatory framework and the imposition of relatively high taxes. This resilience suggests a strong underlying belief among users in the long-term potential of digital assets.
For many investors, cryptocurrencies represent more than short-term trading opportunities. They are seen as a hedge against inflation, a gateway to global financial markets, and a vehicle for technological innovation. The willingness of users to continue participating, even under a strict tax regime, highlights the depth of interest in the sector.
Industry observers note that while trading volumes on domestic exchanges initially dipped after the introduction of the 1 percent TDS, activity has gradually stabilized. This adjustment period appears to be giving way to a more compliance-oriented market structure.
Regulatory Uncertainty Still Looms
Despite growing acceptance at the user level, regulatory clarity remains a work in progress. The Reserve Bank of India has consistently maintained that cryptocurrencies are not legal tender and has warned about risks related to volatility, consumer protection, and financial stability.
At the same time, several indirect laws and guidelines related to taxation, anti-money laundering, and reporting are already in place. Policymakers have indicated that discussions are ongoing regarding a more comprehensive legal framework for digital assets, though no definitive timeline has been announced.
This dual approach reflects India’s cautious stance. Authorities appear intent on allowing innovation to continue while retaining the ability to intervene if systemic risks emerge. The expanding TDS data set is likely to play a central role in shaping future policy decisions.
What the Numbers Really Reveal
Beyond the headline growth figures, the state-wise TDS data offers a window into how India’s crypto economy is structured. Maharashtra and Karnataka’s dominance underscores the importance of established financial and technology ecosystems in driving adoption. Meanwhile, rising contributions from regions like Delhi point to broader institutional participation.
At the same time, the data also highlights the limitations of using registration-based metrics. As crypto trading is inherently digital and borderless, actual user activity may be far more geographically dispersed than the numbers suggest.
For analysts and regulators alike, the challenge lies in translating these insights into balanced policies that encourage innovation while safeguarding financial stability.
Looking Ahead
As India’s crypto market continues to mature, the role of taxation and compliance will remain central. The steady rise in TDS collections suggests that the government’s monitoring mechanisms are becoming more effective, even as adoption accelerates across the country.
The coming years are likely to see further refinements to the regulatory framework, driven by both domestic considerations and global developments in digital asset governance. Whether India ultimately embraces crypto as a fully regulated asset class or maintains its cautious stance, the current data makes one thing clear: digital assets are firmly embedded in the country’s financial landscape.
For now, Maharashtra and Karnataka stand at the forefront of this transformation, reflecting how regional ecosystems can shape national trends in one of the world’s fastest-growing crypto markets.
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