A TIOL study reveals that over 90% of India’s crypto trade is now happening on offshore platforms, exposing huge revenue leaks and highlighting urgent gaps in India’s tax framework.
New Delhi, 04 December 2025
India’s crypto economy may be booming, but much of the action is happening far from the government’s oversight. A new report by the TIOL Knowledge Foundation has uncovered that an overwhelming ₹4.88 lakh crore in crypto trades by Indian users moved to offshore platforms during FY24–25—a trend that poses serious challenges for India’s tax authorities.
The study, titled “Taxation of Digital Assets in India – A Data-Driven Assessment of India’s VDA Tax Regime and its Market Impact,” suggests that India is losing visibility and significant tax revenue as traders increasingly bypass domestic exchanges.
Offshore Shift Continues to Accelerate
The findings support earlier research by the Esya Centre, which had estimated Indian offshore crypto trades at ₹2.63 lakh crore the previous year. Together, these studies signal an unmistakable trend: Indian crypto activity remains high, but most of it now lies beyond the country’s formal regulatory and tax purview.
What Sparked the Migration?
According to TIOL, the shift can be traced to the Finance Act 2022, which introduced:
- a 30% tax on crypto gains,
- a ban on loss set-offs,
- and a 1% TDS on nearly every trade.
The intent was to curb speculative trading and improve traceability. However, the effect has been the opposite. Despite heavy trading volume, the government collected only ₹706 crore in capital-gains tax and ₹338 crore in TDS across FY22–23 and FY23–24.
How Much Is Escaping the Tax Net?
To understand the missing revenue, TIOL reconstructed India-linked trades using:
- global exchange traffic patterns,
- order-book samples,
- and Binance’s rupee P2P data.
Their assessment shows domestic exchanges processed only ₹45,000 crore of trades—just 8–10% of total India-linked volume. The rest, more than ₹4.88 lakh crore, flowed through international exchanges, many of which are officially blocked but accessible through VPNs.
A Huge Revenue Gap
TIOL estimates that since the introduction of 1% TDS in July 2022, the government has missed out on more than ₹11,000 crore in TDS from offshore trades. Within the most recent 12-month period alone, roughly ₹4,877 crore of TDS remained uncollected.
Additionally, cumulative losses in potential capital-gains tax could be around ₹36,000 crore.
If the current trend holds, Indians may route ₹39.9 lakh crore worth of trades offshore over the next five years—resulting in nearly ₹39,971 crore in forgone TDS by FY2030.
Other Studies Support the Findings
- Esya Centre earlier reported that 92% of Indian crypto trading moved offshore after the 2022 tax rules, leading to ₹3,493 crore in missing TDS.
- Their December 2024 update pegged uncollected TDS at over ₹6,000 crore.
- A NALSAR University study found 97% decline in domestic trading volume and potential losses around ₹2,489 crore.
P2P Trading on the Rise
A major chunk of the migration is moving toward peer-to-peer (P2P) platforms, where users pay through UPI or bank transfer and need exchanges only for crypto escrow. Meanwhile, visits from Indian IPs to blocked exchanges continue to grow, showing how ineffective current enforcement measures are.
TIOL’s Recommendations for Fixing the System
To address the widening revenue gap, TIOL recommends:
- Amending Section 194S to require both Indian and offshore exchanges serving Indian users to deduct TDS, regardless of whether they handle rupee transactions.
- Bringing crypto taxation in line with other asset classes.
- Strengthening annual reporting requirements for better transparency.
As India evaluates the future of digital asset regulation, the TIOL report makes one thing clear: without timely reforms, a massive chunk of the country’s crypto-driven revenue may continue to vanish offshore.
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