- Offshore exchanges absorbed most Indian crypto trading volume as domestic tax deductions reduced execution efficiency and market depth.
- Concentrated TDS payments from a small user base distorted turnover data and weakened signals from local platforms.
- Capital gains taxes without loss offsets redirected liquidity toward global venues with fewer transaction frictions.
Indian crypto trading shifted sharply offshore in FY25 as tax rules altered market behavior. Data from KoinX shows more than 72% of trading volume moved to international exchanges.
Traders continued active participation despite heavy capital gains taxes and 1% TDS deductions. The trend signals weakening domestic liquidity and growing reliance on overseas platforms during fiscal times.
Offshore Exchanges Dominate Trading Activity
KoinX reported that Indian crypto trading generated nearly Rs 51,252 crore in total volume. More than 72% of this activity occurred on offshore platforms during FY25.
This movement followed renewed access to global exchanges registered with India’s Financial Intelligence Unit. Liquidity, therefore, concentrated where execution remained uninterrupted by domestic deductions.
The dataset reviewed behavior from over 670,000 users across different venues. This coverage reflected broad market participation rather than isolated exchange statistics.
Offshore platforms continued to attract active traders seeking faster order matching. Market structure adjusted toward venues offering stable depth and predictable settlement.
Several industry tweets described the trend as a response to transaction-based taxation. These posts noted that compliance alone did not guarantee competitive volumes.
Traders prioritized efficiency over location when executing spot and derivatives positions. As a result, offshore order books absorbed most directional flow.
Taxation Alters Profit and Loss Dynamics
Indian crypto trading recorded Rs 6,394 crore in profits across spot, margin, and futures markets. Losses reached Rs 4,781 crore during the same fiscal period.
Nearly half of active traders still paid capital gains taxes despite net negative outcomes. This framework prevented traders from offsetting losses against gains.
Current market pricing is based on offshore benchmarks rather than domestic quotations. Bitcoin traded near prevailing global market levels throughout FY25 sessions.
Price discovery, therefore, shifted toward international exchanges with higher participation. Domestic platforms mirrored these prices but processed smaller volumes.
Tweets from market participants stressed that taxation influenced execution venues more than profitability. The absence of loss offsets increased the cost of frequent trading.
Consequently, traders favored platforms where enforcement remained inconsistent. Liquidity gradually migrated alongside price formation.
TDS Concentration Skews Market Signals
Indian exchanges applied a 1% tax, deducted at source, on every cryptocurrency sale. Total collections reached Rs 511.83 crore during FY25.
Fewer than five percent of users accounted for most of this amount. This concentration distorted turnover-based interpretations of market health.
The deducted amount represented only 0.60% of domestic exchange volume. TDS applied only to sell transactions, leaving many trades unaffected.
Offshore transactions avoided automated deductions entirely. This difference encouraged continued migration of active traders.
Industry tweets ahead of the Union Budget 2026 called for structural tax reform. Participants proposed lower capital gains rates and recalibrated TDS thresholds.
These measures aimed to restore domestic liquidity and balanced participation.
Conclusion: Market Reaction
CoinGecko reports a $205 billion 24-hour volume, with Bitcoin at $82,473 and Ethereum at $2,728, respectively.
Despite daily declines of 6–7%, liquidity and trading activity have remained robust. In contrast, in domestic platforms, TDS deductions and restricted loss offsets limited effective participation.
Indian traders are therefore executing trades on global exchanges to access active markets and real-time price movements. This reflects how taxation pressures drive volume offshore while global liquidity sustains trading opportunities.