- Offshore exchanges handled an estimated 95% of India’s VDA trading volume in FY 2025-26.
- The report proposes cutting crypto TDS and allowing eligible losses to be offset against gains.
- Offshore crypto trading could reach ₹15.27 lakh crore by FY 2030-31 if current trends continue.
India’s crypto tax rules are under fresh scrutiny as more trading takes place on offshore platforms. A new report from the TIOL Knowledge Foundation says that the offshore exchanges accounted for about 95% of India’s VDA trading volume in FY 2025-26. The report says that the 1% TDS and other crypto tax regulations may have pushed traders away from domestic platforms.
Crypto Trading Volume Shifts Offshore; Here’s Why
Offshore crypto exchanges reportedly handled around ₹9 lakh crore in trading volume during the last financial year. At the same time, domestic platforms recorded only ₹51,446 crore. This gap itself is enough to understand the changing investor sentiment, where traders opt for platforms outside India.
As pointed out in the report, India’s crypto tax rule is one of the major reasons behind this shift. In India, crypto traders are required to pay 1% TDS on applicable VDA transactions. Also, the Income Tax Department imposes a 30% tax on crypto profits. More importantly, they cannot set off losses from a crypto transfer against gains from another. Thus, traders face increased trading costs, making frequent trades less attractive on Indian crypto exchanges.
P2P Trading Gains as Traders Turn to Offshore Platforms
Additionally, the report stated that peer-to-peer (P2P) trading is also a key reason behind the investors’ shift to offshore crypto exchanges. In P2P trading, users can buy and sell digital assets directly with each other instead of trading through a traditional exchange order book.
Reportedly, Indian visitors to a leading offshore P2P platform surged by 73% between July 2025 and April 2026. The purchase conversions also rose by about 3.6 times. The INR-based P2P trading volume increased by 29% between April 2025 and June 2026.
Crypto Platform Ban Failed to Bring Traders Back
In this context, it is important to highlight the Indian government’s previous moves on crypto platforms. In October 2025, the country blocked 25 offshore crypto platforms to curb trading. But things didn’t come as expected. The move did not bring back traders to domestic platforms. Instead, traders continued to trade on other offshore platforms.
Will Crypto Tax Reforms Bring Trading Back to India?
Interestingly, the TIOL Knowledge Foundation report highlighted the need for changes in the Indian crypto tax rules. The report stated that such amendments could make Indian crypto exchanges more attractive.
The key proposal is to change the 1% TDS on crypto transactions. The report asserted that the TDS should be reduced to 0.01%. This could lower the upfront cost of trading while allowing authorities to track transactions.
Importantly, the report also recommends changing the existing rules of calculating losses and gains. Under the proposal, traders should be allowed to offset crypto losses against gains and forward eligible losses to future years.
If the current trend continues, offshore crypto trading could hit a high of ₹15.27 lakh crore by FY 2030-31, added the report. However, with the crypto tax reform, the country could generate about ₹1,80,814 crore in cumulative capital gains tax over five years.
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Moreover, the report warned that India could see more crypto trading move offshore if the current tax rules stand. This could make it challenging for authorities to track transactions and collect the applicable taxes. It could also affect the growth of domestic crypto exchanges.
The estimated tax shortfall is significant, according to the report. Uncollected TDS since July 2022 is marked at around ₹19,049 crore. Estimated cumulative tax losses are ₹57,147 crore. Thus, the report argues that the government would face significant losses if the existing crypto tax rules are not restructured.
Related: India’s Crypto Tax Relief May Be Back on the Table. But Will It Actually Change Trading?
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