Taxation may be considered a necessary and inevitable part of governance. At the same time, when taxes are unusually high, it's difficult for relatively new technologies to thrive and for financial sectors to grow. India's tax-burdened cryptocurrency community is a textbook example of this.
Indeed, India's regulatory regime of the past few years should, at least in theory, have made it impossible for the crypto adoption to take hold. Yet, the evidence shows that the decentralized digital asset cannot and will not be stopped, with India providing proof positive that a tech-propelled grassroots movement can overcome even the harshest tax rules. Binance CMO Rachel Conlan spoke at The Binance Super Meetup Conference in Delhi about India's thriving crypto community, "Our super meetup in Delhi reflects Binance's strong commitment to India and its vibrant crypto community. India is a global leader in crypto adoption, showing huge potential in blockchain technology and digital assets. The energy and innovation from the Indian crypto community are inspiring, and we're excited to connect directly to gain insights and work together. This event is all about building a shared vision for the future of crypto in India, fueled by collaboration and a shared drive for growth."
A Jaw-dropping Tax on Crypto Assets
It's no secret that India's authorities are ready and willing to crack down on blockchain-related activity in the nation. A prime example of this occurred in late 2023 when India's Financial Intelligence Unit (FIU) issued show-cause noticesto nine offshore cryptocurrency exchanges, including Binance, for alleged noncompliance with local regulations.
Show-cause notices aren't the only way India's government has made it more difficult for the nation's crypto community to operate and thrive, however. A high taxation rate on cryptocurrency assets put pressure on participants while seemingly discouraging crypto community activity and adoption.
The numbers might shock and alarm you. For starters, India requires all cryptocurrency service providers and investors to pay a 1% tax deducted at source (TDS) on every cryptocurrency transaction.
That's not the real jaw dropper, though. Starting in 2022, on top of the TDS of 1% per transaction, all profits on cryptocurrency investments in India have been subject to a 30% tax.
With that, India's taxation regime has placed hefty financial burdens not only on aspiring cryptocurrency traders and investors, but also on exchanges seeking to operate compliantly within the region. In August, for example, India's Directorate General of Goods and Services Tax Intelligence (DGGI) levied a tax demand on Binance totaling the equivalent of $86 billion.
Binance has willingly complied with India's severe tax requirements and, as of late 2024, is able to operate within the nation's cryptocurrency market. Still, it's a tough environment in which to conduct business as a crypto-related firm. ZebPay Chief Operating Officer (COO) Raj Karkara summed up the widespread sense of frustration, declaring that India's tax structure "can erode profits" and "discourages frequent trading."
India Emerges as a Surprising Leader... Twice
Amid this stringent regulatory backdrop and draconian taxation regime, one might jump to the conclusion that cryptocurrency adoption in India must be somewhere between slim and nonexistent. However, the data actually indicates that India maintains a thriving crypto community despite the obstacles.
As jaw-dropping as India's 30% flat crypto-profit tax may be, here's a fact that might even be more surprising. In 2023 and then again in 2024, Chainalysis determined that India was the number-one cryptocurrency-adopting nation on the planet.
That's right - for two consecutive years, according to Chainalysis's findings, India overcame its harsh regulatory framework and beat out the U.S. (which took fourth place in 2024), Indonesia (third place), and Nigeria (second place). Moreover, the report determined that India took the top spot in terms of "Overall index ranking," "Centralized service value received ranking," and "Retail centralized service value received ranking" in 2024.
And here's another statistic which might not be quite as eye-popping but is nonetheless encouraging. As of November 2024, roughly 7%of India's population owned digital assets, a notable improvement over 6.5% in 2023. For comparison, America's digital asset ownership rate stood at 13% in November 2024 - but then, India's crypto-market participants have had to overcome regulatory and taxation burdens that Americans weren't subject to.
"Fertile Ground" for Growth
How has it been possible for India to beat the odds and grab the number-one spot among cryptocurrency-adopting nations? For one thing, Indian crypto YouTuber Ajay Kashyap observed that "Indians are extremely tech-savvy, with over half of its citizens under the age of 25."
India's young, tech-ready segment of the populace is, it seems, a contributing factor as the nation was host to an estimated 100 million cryptocurrency owners in 2024. Along with that, Kashyap cited a "combination of widespread smartphone usage, cheap internet and a growing interest in blockchain technology" as conducive to India's "fertile ground for cryptocurrency adoption, particularly among younger individuals."
Whether the "ground" will remain as "fertile" in 2025 remains to be seen, and it won't be easy for India to maintain its number-one status for a third straight year as a crypto-adopting nation. Still, crypto-space participants throughout the world can find inspiration as India's crypto community manages to not only survive but demonstrably thrive in the face of ultra-taxing tax rates.