India’s 30% crypto gains tax: no loss offsetting, 1% TDS, offshore trading surges
India has kept a strict crypto gains tax framework unchanged: a 30% flat tax on gains from “virtual digital assets” (VDAs). Since February 2022, the 30% crypto gains tax has been paired with a 1% tax deducted at source (TDS) on every transaction, regardless of whether a trade is profitable.
The most market-relevant part is the loss-offsetting ban. Under Section 115BBH, crypto losses cannot be used to reduce crypto gains taxes, and they cannot be carried forward to later tax years. This creates an asymmetric risk profile for active traders and increases the effective cost of volatility.
The article cites that India has about 39 million verified crypto investors holding roughly $2.1B in digital assets. However, it claims that over 90% of trading activity has moved to offshore platforms. Estimated capital outflows are about $6.1B annually, versus domestic crypto holdings totaling $2.1B, with reported domestic tax revenue around 437 crore rupees.
Indian exchanges reportedly saw volumes fall after the TDS rollout in 2022, with traders shifting activity to global venues such as Binance and OKX outside India’s regulatory perimeter.
On top of the fiscal pressure, the Reserve Bank of India (RBI) has reiterated support for a full crypto ban and has advised banks to limit exposure to crypto-related businesses—tightening on-ramps/off-ramps even for users willing to comply with the 30% crypto gains tax.
For traders, the near-term implication is higher all-in friction and weaker domestic liquidity as users route around the tax regime. Longer-term, continued regulatory hostility could further concentrate volume on offshore markets.
Bearish
This news is bearish for India-focused crypto trading because the “30% crypto gains tax” plus a 1% TDS on every transaction raises the effective cost of trading and punishes losses—there is no loss offsetting and no carryforward. Historically, similar fiscal/structural constraints (e.g., tax regimes that tax gross gains without netting losses) tend to push activity offshore, reduce domestic exchange volumes, and widen the gap between onshore compliance and actual trading flows.
In the short term, traders are likely to see lower participation in Indian venues as liquidity migrates to offshore exchanges that don’t face the same TDS/loss-netting limitations. This can increase price dispersion for India-linked order flow and reduce domestic market depth.
In the long term, the RBI’s reiterated preference for a full ban and pressure on banks to limit crypto exposure can further degrade banking rails (on/off-ramps), reinforcing offshore concentration. That dynamic may stabilize global trading volumes on major offshore platforms, while weakening the sustainability of local market infrastructure. Net effect: fewer efficient hedging opportunities for active traders and a structural drag on India-based participation.