India’s rigorous stance on taxing Virtual Digital Assets (VDA) is showing dramatic results, with government collections from the 1% Tax Deducted at Source (TDS) rule now surpassing ₹1,000 crore in just three financial years.
Thank you for reading this post, don't forget to subscribe!Data shared by the Finance Ministry confirms that the 1% TDS, mandated under Section 194S since July 2022, has become a potent tracking tool. The total collection stands at ₹1,095.80 crore, reflecting a massive underlying crypto trade volume of over ₹58,000 crore.
The Collection Surge
The yearly collections show a rapid growth in compliance:
- FY23: ₹221.27 crore
- FY24: ₹362.70 crore
- FY25 (YTD): ₹511.83 crore
Crackdown on Offshore Exchanges
Despite rising domestic compliance, the government is tackling offshore exchanges that fail to adhere to Indian tax laws. Targeted enforcement action has uncovered significant tax evasion:
- Surveys on three such exchanges revealed TDS lapses of ₹39.8 crore and undisclosed income of ₹125.79 crore.
- Wider operations across the VDA ecosystem have brought to light an alarming ₹888.82 crore in undisclosed income, underscoring the necessity of a transparent framework.
Maharashtra and Karnataka lead the state-wise collections, confirming their status as major tech and trading hubs for India’s active crypto user base.
TDS on Crypto: How India’s 1% Rule Unlocked a ₹58,000 Cr Market
The Indian government’s strategy to regulate the booming Virtual Digital Asset (VDA) market is proving highly effective. By introducing a simple 1% TDS on crypto transactions, authorities have gained an unprecedented view into the sector, with collections crossing the ₹1,000 crore mark in just three years.
The Power of Section 194S
The 1% TDS rule, implemented in July 2022 under Section 194S of the Income Tax Act, was designed primarily as a tracking mechanism to combat tax evasion. The financial data released by the Finance Ministry confirms its success, with the total collection of ₹1,095.80 crore reflecting VDA trades worth well over ₹58,000 crore.
The data highlights a steep increase in compliance:
- FY23: ₹221.27 crore
- FY25 (YTD): ₹511.83 crore
Enforcement Escalates Against Non-Compliant Entities
While domestic reporting improves, a major challenge remains the non-compliance of offshore crypto exchanges catering to Indian users. The Income Tax Department has initiated a serious crackdown. Recent surveys have already identified ₹39.8 crore in TDS lapses and ₹125.79 crore in undisclosed income from just three such exchanges.
Furthermore, broader searches across the VDA ecosystem have exposed a staggering ₹888.82 crore in undisclosed income. These aggressive findings cement the government’s commitment to creating a transparent and compliant ecosystem for digital assets. The state-wise data, showing Maharashtra and Karnataka as the leaders, also provides valuable insights into the geographical concentration of India’s crypto traders.
