India's withholding tax drives crypto traders abroad

India’s cryptocurrency tax policy is showing effects—albeit in undesirable ways. About three-quarters of trading volume has left the market and shifted to foreign platforms. NS3.AI documents this massive outflow of domestic activity, demonstrating how drastically regulation has changed market dynamics.

75% of trading volume is leaving the market

The exodus is impressive in its scale: 75% of cryptocurrency trading has now migrated abroad. This not only results in a noticeable decline on local platforms but also represents a significant loss of tax revenue and economic control for the Indian government. Investors and traders are turning to international exchanges to avoid the burden of high tax rates.

The withholding tax (TDS) applicable to crypto transactions poses a substantial burden for many market participants and drives them to seek alternatives. Additionally, the lack of ability to offset losses against gains makes the local market even less attractive.

Tax policy comes under reform pressure

The Union Budget 2026 is at the center of reform debates. Policymakers face increasing pressure from the industry to make course corrections. In particular, the withholding tax is expected to be reduced—a move that could also allow for loss offsetting.

Experts argue that the current strategy has achieved the opposite of its intended goal: instead of increasing control, it has driven capital and expertise abroad. A more moderate tax approach could restore confidence and revitalize the domestic market.

Industry calls for a balanced approach

Industry associations and experts agree: a balanced tax and regulatory framework is essential to promote innovation and keep capital in India. The reform of the withholding tax is seen as a key measure. Only through an intelligent balance between control and attractiveness can India regain importance as a cryptocurrency hub and enable the return of trading volume.