The Indian government has collected ₹512 crores as tax deducted at source (TDS) on cryptocurrency and virtual digital asset transactions during the financial year 2024-25 (April-March), according to Minister of State for Finance Pankaj Chaudhary. This figure reflects a notable increase in cryptocurrency activity, with a 41% jump in TDS collection compared to the previous financial year (₹3.63 billion in FY24).
This surge in tax revenue is indicative of the expanding use of digital assets in India. The government imposes a flat 30% tax on profits made from cryptocurrency transactions, alongside a separate 1% TDS on the transaction value each time a digital asset is bought or sold. The TDS mechanism helps the tax authorities keep track of crypto transactions while the 30% tax specifically targets the gains made from them.
Maharashtra and Karnataka continue to be the frontrunners in cryptocurrency transactions in India. Together, these two states account for over 80% of the country's crypto activity. In FY25, Maharashtra contributed ₹293 crores to the TDS collection, while Karnataka followed closely with ₹134 crores. These numbers underscore the concentration of cryptocurrency transactions in these states, reflecting their status as major hubs for digital asset trading in India.
While the government has not outright banned cryptocurrency, it remains largely unregulated in India. Cryptocurrencies are classified as “virtual digital assets” by the government and the Reserve Bank of India (RBI), but they are not recognised as legal tender. This means there is limited oversight on their use, although taxes have been levied to curb potential misuse.
In his statement, Chaudhary clarified that there have been no comprehensive studies on taxation models for cryptocurrencies, unlike countries such as Thailand and Indonesia, which have implemented more robust frameworks for digital asset taxation. However, in response to the growing concerns around cryptocurrency misuse, especially in illicit activities, the government has taken steps to ensure greater oversight.
To prevent cryptocurrency misuse, particularly in cases of money laundering and terrorism financing, the Financial Intelligence Unit (FIU) requires that all Virtual Asset Service Providers (VASPs) be registered under the Prevention of Money Laundering Act (PMLA). This registration requirement applies equally to domestic and offshore platforms that serve Indian users, ensuring that the government can monitor and regulate crypto transactions more effectively.
In addition to these measures, the Directorate of Revenue Intelligence (DRI) has called for stronger regulatory frameworks, advanced forensic tools, and international cooperation to tackle the misuse of digital assets, which have been increasingly linked to activities like smuggling and money laundering
As the crypto market continues to grow, India faces the challenge of balancing innovation with regulation. While the government has taken initial steps through TDS collection and anti-money laundering measures, there is still much to be done in terms of comprehensive crypto regulation. With cryptocurrencies being used for both legitimate transactions and illicit activities, stronger regulatory frameworks will be needed to ensure that the sector remains transparent and secure for all stakeholders involved.
The rise in crypto-related TDS collection is a clear indication of the growing importance of digital assets in the Indian economy. However, the future of crypto regulation in India remains uncertain, and it will be interesting to see how the government evolves its approach in the coming years.
