Crypto Tax Collections Jump 41%; Maharashtra, Karnataka on Top

India’s crypto TDS collections surged 41% in FY25, reaching ₹511.83 crore, with Maharashtra and Karnataka leading the contributions. Maharashtra-based exchanges accounted for ₹293.40 crore, while Karnataka followed with ₹133.94 crore, said a report by Hindustan Times, citing official data from the Finance Ministry.

India’s crypto TDS collected in the previous financial year (FY24) was ₹362.70 crore. For context, FY25 rose to ₹511.83 crore, a 41% jump, under the 1% TDS on VDA transfers (Section 194S) effective since July 1, 2022.

Virtual Digital Asset (VDA) transfers refer to the buying, selling, or exchanging of digital assets such as cryptocurrencies and NFTs. In India, these transfers are subject to a 30% tax on profits and a 1% TDS deduction on each transaction.

Key Highlights of Crypto TDS Surge

• Total TDS collected (FY25): ₹511.83 crore, up from ₹362.70 crore in FY24 — a 41% increase.
• Top contributors by state (exchange base):
  • Maharashtra: ₹293.40 crore (+30.6%)
  • Karnataka: ₹133.94 crore (+63.4%)
  • Gujarat: ₹28.63 crore (slight decline of 2.3%)
  • Delhi: ₹28.33 crore (sharp rise from previous year)
• Policy background: Since July 1, 2022, India mandates a 1% TDS on all crypto/virtual digital asset (VDA) transfers under Section 194S of the Income Tax Act.
• Purpose: Designed to track crypto transactions in real time and curb tax evasion.

Why This Matters

• Government oversight strengthened: The surge reflects tighter monitoring of crypto activity and compliance by exchanges.
• Regional dominance: Maharashtra and Karnataka’s lead highlights their role as crypto exchange hubs.
• Investor impact: The 1% TDS rule has been criticized for reducing liquidity in crypto markets, but it ensures greater transparency for regulators.
• Tax enforcement trend: Authorities have also acted against exchanges for GST evasion and issued notices to tens of thousands of investors.

Risks & Trade-offs

• Liquidity drain: The 1% TDS on every transaction discourages frequent trading, especially for retail investors.
• Compliance burden: Exchanges must maintain detailed transaction records, increasing operational costs.
• Market shift: Some traders may move to offshore or decentralized platforms to avoid TDS, raising enforcement challenges.
• Regulatory uncertainty: India still lacks a comprehensive crypto regulatory framework, leaving investors exposed to volatility and legal ambiguity.

Strategic Takeaway

• The 41% surge in crypto TDS collections signals that India’s tax authorities are successfully tightening their grip on digital asset transactions.
• For investors and exchanges, this means higher compliance costs but also clearer government oversight.
• Maharashtra and Karnataka’s dominance underscores their position as crypto infrastructure centers, shaping India’s evolving digital asset landscape.