India Leads Global Crypto Adoption Despite Harsh Tax Rules

India is the top country in the world for cryptocurrency adoption - and it’s doing so while taxing digital assets like gambling winnings.

While the U.S., Europe, and even Singapore offer clearer, lighter tax rules for crypto, India slapped on one of the strictest systems on the planet. A flat 30% tax on every profit. No deductions for losses. A 1% tax taken out automatically on every trade over ₹50,000. And now, as of July 2025, an extra 18% GST on everything from trading fees to staking rewards. Yet, millions of Indians still buy, sell, and hold crypto. Why?

The answer isn’t about tax efficiency. It’s about necessity, opportunity, and distrust in traditional finance. For young professionals, gig workers, and small business owners, crypto isn’t a luxury. It’s a way to send money across borders without bank delays, protect savings from rupee inflation, or access global investment opportunities that banks won’t offer.

How India’s Crypto Tax System Works - And Why It’s So Harsh

In 2022, India reclassified cryptocurrencies as Virtual Digital Assets (VDAs). That didn’t make them legal tender. But it did make them taxable. The rules that followed were unlike anything else in the world.

First, the 30% tax. Every time you sell Bitcoin, Ethereum, or even an NFT for more than you paid, you owe 30% of the profit. No exceptions. No lower rates for long-term holdings. No deductions for trading fees, mining costs, or wallet expenses. Even if you lost money on 10 other coins, you can’t use those losses to reduce your tax bill. That’s not how taxes work anywhere else.

Then there’s the 1% TDS - Tax Deducted at Source. Every time you trade more than ₹50,000 (about $600), the exchange automatically withholds 1% of the transaction value and sends it to the government. It doesn’t matter if you made a profit. Even if you sold at a loss, you still lose 1% upfront. For someone trading daily, that adds up fast. A trader doing five ₹1 lakh trades a month loses ₹5,000 just in TDS - regardless of whether they’re up or down overall.

And since July 2025, the 18% GST hit every crypto platform service: trading fees, deposits, withdrawals, staking rewards, custody fees - even if you didn’t make a single rupee in profit. Platforms now have to register for GST no matter how small they are. That’s pushed many local exchanges to raise fees, which in turn pushed users to offshore platforms like Binance or Bybit.

Compare that to the U.S., where long-term crypto gains are taxed at 0% to 20%, depending on income. Or Germany, where holding crypto for over a year means zero tax. Or Portugal, where personal crypto gains are completely tax-free. India’s system isn’t just strict - it’s designed to discourage participation.

Why People Still Buy Crypto in India

Despite the tax burden, India has more crypto users than any other country. According to Chainalysis, India led global adoption in 2024 and held that spot into 2025. Why?

One big reason: remittances. India receives over $100 billion in foreign remittances every year. Sending money through banks or Western Union can take days and cost 5-7%. With crypto, you can send money in minutes for less than 1% - and the recipient can cash out locally through P2P platforms like WazirX or CoinSwitch.

Then there’s inflation. The Indian rupee has lost nearly 40% of its value against the dollar since 2014. For many, holding even a small amount of Bitcoin or Ethereum feels like a hedge. It’s not about getting rich overnight. It’s about not losing what you already have.

Young people are also using crypto to access global markets. Indian stock markets don’t let you invest directly in Apple, Tesla, or Nvidia without going through expensive mutual funds. With crypto exchanges, you can buy fractional shares of tokens tied to those companies - or even invest in global DeFi protocols that offer 5-10% annual yields, far higher than bank fixed deposits.

And let’s not forget the informal economy. Millions of Indians work in gig jobs - delivery, content creation, freelancing - and get paid in crypto from international clients. Cash out? Not easy. But crypto? They can convert it to INR through local P2P networks without touching a bank.

The Hidden Cost: Trading Moves Overseas

The tax rules didn’t just hurt users - they hurt local businesses.

Since 2022, at least 12 major Indian crypto startups have shut down or moved their operations abroad. Others, like ZebPay and CoinDCX, have shifted their core development teams to Dubai or Singapore to avoid the regulatory chaos. Even though they still serve Indian customers, their infrastructure now runs outside India.

Why? Because the 1% TDS and 18% GST make it nearly impossible to compete with global exchanges. Binance doesn’t charge TDS. Kraken doesn’t add GST on trading fees. So Indian traders - even those who want to stay compliant - are increasingly using offshore platforms. Estimates suggest over 60% of Indian crypto trading volume now happens on foreign exchanges.

That creates a dangerous loop. The government collects less tax because transactions are happening off the books. Meanwhile, Indian users face higher risks - no local customer support, no legal recourse if funds get frozen, and no protection under Indian law.

Who’s Really Paying the Price?

The tax system claims to target “speculators.” But in practice, it hits everyday people the hardest.

Imagine a college student who bought $100 of Bitcoin in 2021. It’s now worth $300. They sell half to pay tuition. Profit: $100. Tax owed: $30. TDS taken at sale: $1 (on the ₹50,000 trade). GST on the exchange fee: ₹90 (18% of ₹500 fee). Total cost: $31. But they only made $100 profit. That’s 31% gone - and they still have $100 in crypto left.

Now imagine they bought another coin that lost 50%. They can’t use that loss to offset the gain. So they pay tax on the $100 profit even though their portfolio is down overall.

Or consider a freelancer paid in USDT. They convert it to INR every week. Each time, the exchange takes 1% TDS. After 52 weeks, they’ve lost 52% of their trading volume to TDS - even if their total income was just ₹5 lakh. That’s not tax. That’s a transaction tax on survival.

Is There a Way Out?

In August 2025, the Central Board of Direct Taxes (CBDT) quietly started asking questions. They sent out detailed surveys to Indian crypto firms: Is the 1% TDS too high? Does the 30% tax kill market liquidity? Are offshore platforms giving foreign companies an unfair edge?

That’s a big deal. It’s the first sign that the government might be listening.

Experts say the system is unsustainable. The tax revenue from crypto is still tiny - less than 0.1% of total income tax collections. But the cost to the ecosystem? Billions in lost business, brain drain, and trust.

Change is coming - slowly. Some proposals being discussed include:

• Allowing loss offsets between different crypto assets
• Reducing TDS to 0.1% or making it only apply to profits
• Exempting small trades under ₹10,000 from TDS
• Removing GST on custody and staking services

One thing’s clear: India can’t keep taxing crypto like it’s a casino and expect to lead in adoption. The world is moving toward regulation that encourages innovation - not punishes it.

What This Means for Indian Crypto Users

If you’re trading crypto in India right now, here’s what you need to know:

1. Keep every single transaction record - buys, sells, swaps, staking rewards. The Income Tax Department now tracks everything through exchange data sharing.
2. Report everything in Schedule VDA in your ITR. Missing one trade can trigger an audit.
3. Don’t assume offshore exchanges are safer. You’re still liable for Indian taxes on global trades.
4. If you’re a frequent trader, consider using a crypto tax software like Koinly or CoinTracker - they can auto-calculate your gains and losses under Indian rules.
5. Watch for policy changes in late 2025. A new tax framework could arrive as early as April 2026.

The truth? India’s crypto story isn’t about rules. It’s about resilience. People are using crypto not because it’s easy - but because it’s necessary. And as long as that need exists, adoption won’t stop. The question isn’t whether India will regulate crypto. It’s whether it will regulate it wisely - or keep shooting itself in the foot.