The Indian government has recorded a significant increase in tax deducted at source (TDS) on virtual digital assets (VDAs), including cryptocurrencies, for the fiscal year 2024-25. According to finance ministry data, total TDS collections from VDA transactions jumped by over 41%, rising to ₹511.83 crore from ₹362.70 crore in the previous fiscal year.

State-Wise TDS Contributions

The TDS data highlights regional disparities, largely reflecting the locations of registered crypto exchanges rather than the exact locations of individual trades:

• Maharashtra: ₹293.40 crore, the highest in the country.
• Karnataka: ₹133.94 crore, marking a 63.4% increase year-on-year.
• Gujarat: ₹28.63 crore, which saw a slight decline of 2.3% compared to the previous year.
• Delhi: ₹28.33 crore, a dramatic surge from ₹0.99 crore in FY24.
• Rajasthan: ₹15.48 crore
• Tamil Nadu: ₹9.97 crore

In other states, TDS collections were either less than ₹1 crore or negligible.

Background and Regulatory Framework

The Union Budget 2022-23, presented on February 1, 2022, introduced a 1% TDS on the transfer of cryptocurrencies and other VDAs, effective July 1, 2022. This measure was aimed at tracking and recording each transaction in the fast-growing digital asset market.

Finance Minister Nirmala Sitharaman had noted at the time that the magnitude and frequency of VDA transactionsnecessitated a dedicated tax regime, which included:

• A 30% tax on income from the transfer of VDAs.
• Mandatory TDS on all VDA transactions to ensure transparency and reporting.

While domestic virtual asset service providers (VASPs) are largely compliant with the TDS provisions, overseas platforms serving Indian clients remain under scrutiny for potential non-compliance. As of November 2025, there were 47 registered VASPs with the Financial Intelligence Unit-India (FIU-IND), which monitors VDA transactions to prevent money laundering and terror financing.

Compliance and Enforcement Measures

The government has been actively monitoring VDA transactions and ensuring adherence to tax norms:

• 18 cryptocurrency exchanges have been targeted for Goods and Services Tax (GST) evasion, amounting to over ₹824 crore.
• The Central Board of Direct Taxes (CBDT) launched the NUDGE campaign, sending over 44,000 communications to taxpayers who traded or invested in VDAs but failed to report the transactions in their income tax returns (ITRs).

Despite the lack of formal regulation for cryptocurrencies in India, the Prevention of Money Laundering Act (PMLA)empowers FIU-IND to register VASPs and track suspicious transactions. Both domestic and overseas platformsoffering services to Indian users are mandated to register, thereby providing authorities with data to curb illegal activities and maintain financial transparency.

Analysis of State Trends

• Maharashtra continues to dominate TDS collections due to its status as a major financial and technological hub, hosting a large number of cryptocurrency exchanges.
• Karnataka’s substantial growth reflects increasing adoption and trading volumes of VDAs in the southern states.
• The surge in Delhi is noteworthy, with TDS rising from under ₹1 crore to over ₹28 crore in a single year, indicating rising digital asset activity in the capital.
• Gujarat’s decline suggests either reduced trading activity or improved compliance in earlier years, leading to lower TDS adjustments.

Implications for the Crypto Sector

The steep rise in TDS collections highlights:

1. The growing popularity of cryptocurrencies and VDAs in India.
2. The government’s increasing focus on monitoring, taxing, and regulating digital assets.
3. The importance of tax compliance for investors, as non-reporting can trigger follow-up actions from CBDT.

While India has yet to formally regulate cryptocurrencies, these measures show a clear intent to bring transparency and accountability to the market. Investors and service providers alike are now under closer scrutiny, with both tax enforcement and anti-money laundering oversight being strengthened.

Conclusion

The FY25 data underscores that India’s digital asset market is maturing, with a significant surge in TDS collections, especially from states like Maharashtra and Karnataka. While compliance among domestic platforms is largely robust, authorities are increasingly focusing on foreign exchanges and non-compliant investors.

As VDAs continue to grow in popularity, the government’s tax collection and enforcement initiatives aim to balance the rapid adoption of digital assets with the need for transparency, accountability, and legal oversight, ensuring that cryptocurrency trading contributes fairly to the country’s tax base.