CoinTelegraph
India's crypto tax regime has not killed the retail base it was designed to discourage. About 39 million verified Indian users still hold roughly $2.1 billion in crypto assets, even with a 30% flat tax on gains and a 1% tax deducted at source (TDS) applied to nearly every on-chain transfer.
Why it matters
The TDS rule, introduced in 2022, was meant to slow trading activity by forcing a withholding tax on every sell, transfer, or swap above a small threshold. Spot trading volumes on Indian exchanges collapsed after the rule took effect, and most major global platforms stopped serving Indian customers. But the user count has held remarkably steady, suggesting Indian retail has shifted from active trading to long-term holding.
Market impact
The combination of a 30% flat rate, no offsetting of losses against other income, and 1% TDS on transfers has reshaped Indian crypto behaviour more than it has reduced Indian crypto exposure. Platforms report the surviving user base is concentrated in blue-chip holdings, with $BTC and $ETH dominating wallets. Any future softening of the TDS threshold or rate would be the most direct catalyst for reviving onshore volume.
Frequently asked questions
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What is the current crypto tax rate in India?
India taxes crypto gains at a flat 30%, regardless of holding period or income bracket. Losses cannot be offset against other income, and gifts above a small threshold are taxed at the receiver's slab rate.
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How does the 1% TDS rule work on crypto in India?
Section 194S requires a 1% tax to be deducted at source on crypto transfers above INR 50,000 per financial year (INR 10,000 in some cases). The deduction applies on the seller side at the time of the transfer, not only on profit.
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Why did Indian crypto trading volumes drop after the tax rules?
The 1% TDS on every transfer made high-frequency trading uneconomic on local exchanges, and several major global platforms exited India rather than build TDS infrastructure. Spot volumes on Indian venues fell sharply after the rules took effect in 2022.
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How many Indians hold crypto despite the tax burden?
Verified user counts on Indian exchanges stand at roughly 39 million, holding about $2.1 billion in assets combined. The base has shifted from active trading toward long-term holding of $BTC and $ETH.
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Could India soften its crypto tax regime?
The industry has lobbied for a lower TDS rate and a higher threshold, and the government has indicated openness to reviewing the framework. Any softening would be the most direct catalyst for reviving onshore trading volume.
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