India’s cryptocurrency market shifted further offshore in FY25 as domestic tax rules reshaped trader behavior. A new analysis by crypto tax platform KoinX shows that more than 72% of Indian crypto trading volume moved to overseas exchanges during the fiscal year.
The data highlights how transaction-level taxation, rather than profitability, influenced where traders executed trades. Consequently, offshore platforms captured most activity despite tighter regulatory scrutiny and recent compliance efforts.
Offshore Platforms Capture Majority of Volume
KoinX reported that Indian traders generated nearly Rs 51,252 crore in crypto volume during FY25. Significantly, 72.66% of that activity occurred on international exchanges. This shift aligned with several global platforms registering with India’s Financial Intelligence Unit to resume services. However, registration alone did not ensure consistent tax compliance across platforms.
Additionally, KoinX analyzed trading behavior from over 670,000 users between FY24 and FY25. The dataset covered both domestic and global exchanges frequently accessed by Indian traders.
As a result, the findings reflect actual user behavior rather than isolated exchange data. Hence, offshore platforms continued attracting volume due to lower friction and uninterrupted liquidity.
Tax Rules Drive Trading Decisions
The report showed that traders recorded total profits of Rs 6,394 crore across spot, margin, and futures trades. However, losses reached Rs 4,781 crore during the same period.
Despite these losses, nearly half of active traders still paid capital gains tax. Consequently, users paid Rs 180 crore in taxes on profits they could not fully realize.
Moreover, these traders faced net capital losses exceeding Rs 1,100 crore. India’s current tax framework prevents loss offsets, increasing the effective burden on frequent traders. Hence, many users favored platforms where tax enforcement remained inconsistent. This behavior reduced liquidity on domestic exchanges over time.
TDS Impact Remains Disproportionate
Indian exchanges deducted 1% TDS on every crypto sale, regardless of profitability. During FY25, total TDS collections reached Rs 511.83 crore. Notably, KoinX users contributed over one quarter of that amount. However, fewer than five percent of users paid most of the collected TDS.
Besides, the 1% TDS represented just 0.60% of domestic exchange turnover. This gap occurred because TDS applied only to sell transactions. Additionally, offshore trading volumes remained largely outside India’s automated deduction system. Consequently, TDS data reflected activity concentration rather than market health.
As the Union Budget 2026 approaches, industry participants continue calling for tax reform. They seek lower capital gains rates, loss offsets, and TDS recalibration. These changes, they argue, could restore domestic liquidity and reduce offshore dependency.
Related: Budget 2026: Will India Keep Crypto Innovation at Home or Push It Away?
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