India's cryptocurrency scene is a paradox: despite the government's harsh tax policies—a 30% tax on crypto gains and a 1% tax deducted at source (TDS) on transactions—crypto adoption is growing.
According to Chainalysis, India has topped the Global Crypto Adoption Index for two consecutive years, underscoring the country’s deep engagement with digital assets.
This robust adoption is largely driven by India’s young, tech-savvy population. With over half of its citizens under 25, the nation boasts a demographic that’s naturally inclined toward digital innovation. Estimates suggest that around 100 million Indians own cryptocurrencies, a figure bolstered by widespread smartphone usage and affordable internet access.
A Heavy Tax Burden
However, the heavy tax burden has had its drawbacks. The 30% tax rate, coupled with the 1% TDS, has deterred frequent trading and driven some investors to offshore tax regimes. A study by the Esya Centre revealed that Indians shifted over $3.8 billion in trading volume from local to foreign crypto exchanges, highlighting the domestic market’s challenges.
Despite these hurdles, India’s crypto ecosystemremains resilient. Local exchanges like ZebPay have developed seamless fiat-to-crypto conversion systems, enhancing transaction accessibility. Moreover, the government’s engagement with the crypto sector is evolving. The Financial Intelligence Unit has issued regulatory approvals to major exchanges such as Binance and KuCoin, signaling a potential shift toward a more accommodating regulatory environment.
