While discussions surrounding cryptocurrency investments in India remain heated, the reality is that the government’s revenue from this sector is steadily increasing. The Ministry of Finance recently informed the Lok Sabha that crypto exchanges have collected approximately ₹1,100 crore in Tax Deducted at Source (TDS) from users over the past three financial years. This figure demonstrates that despite the volatility of investments in digital assets, the government’s tax revenue has grown rapidly.

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The data presented by the government indicates that Maharashtra contributed the most to the TDS collection, accounting for approximately 60 percent of the total. In the financial year 2022-23, ₹142.83 crore was collected as TDS from users in Maharashtra, which increased to ₹293.40 crore by the financial year 2024-25. This suggests that domestic investors and crypto traders are still actively transacting in digital assets.

Following the implementation of the Finance Act 2022, a new provision, Section 194S, was added to the Income Tax Act, 1961. This provision legally mandates a 1 percent TDS deduction on the transfer of any virtual digital asset. This applies to both Indian and foreign exchanges, provided that the earnings made by Indian users are taxable in the country. Due to this rule, TDS is automatically deducted on every crypto purchase and sale.

The government has taken several steps to increase transparency in this sector. To prevent money laundering and monitor illegal financial activities, registration of all Virtual Asset Service Providers (VASPs) through FIU-IND has been made mandatory. This includes foreign platforms that provide services in India. This system ensures that any suspicious transactions during investments in digital assets can be acted upon immediately.

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The Ministry of Finance also stated that investigations have been conducted against three major crypto exchanges and several other entities. These campaigns have uncovered undeclared income exceeding ₹1,000 crore, indicating that tax evasion and irregularities were also rapidly increasing in this sector. The government’s increased scrutiny and the implementation of new regulations are now strengthening control over such activities.