India's crypto tax framework, featuring a 30% tax on gains and 1% Tax Deducted at Source (TDS) on qualifying transactions, may be inadvertently pushing trading activity offshore despite strong domestic adoption. According to Nischal Shetty, Co-founder of Shardeum and WazirX, as reported by ABP Live, the current policy framework has not reduced Indian interest in cryptocurrencies but has changed where trading occurs. The 1% TDS specifically affects liquidity by locking up capital on every trade, making high-frequency or active trading inefficient for domestic platforms.
Many crypto investors continue to make fundamental errors in tax reporting despite the approaching July 31 ITR filing deadline. As reported by ABP Live, Shetty identified the biggest mistake as assuming that crypto transactions don't need reporting unless converted back to INR. He emphasized that every taxable VDA transaction matters, including crypto-to-crypto trades, and warned against poor record-keeping where investors trade across multiple platforms without consolidating transaction history. Investors often overlook TDS deductions, fail to reconcile exchange statements, or attempt to offset crypto losses against other income, which is not permitted under current rules.
If given the opportunity to recommend one immediate policy change, Shetty would reduce the 1% TDS to a much lower rate that enables efficient market participation while preserving transaction visibility for regulators. According to ABP Live, he believes this calibrated approach would encourage more trading activity to remain on compliant Indian platforms, improve transparency, strengthen tax collections over time, and create a healthier ecosystem for innovation. The recommendation comes as India maintains one of the world's largest crypto communities, but significant trading activity has moved to overseas exchanges due to current tax structures.
Despite policy uncertainty, Shetty remains optimistic about India's long-term crypto prospects, citing the country's young population, technology-first mindset, world-class developer ecosystem, and rapid adoption of digital financial services. As reported by ABP Live, he noted that beyond trading, there is growing interest in tokenization, decentralized finance, gaming, creator economies, and blockchain infrastructure. He called for a comprehensive regulatory framework covering licensing, consumer protection, custody standards and compliance norms to help the industry mature, stating that entrepreneurs and investors are willing to comply when the rules are clear.
