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Title: 3 Ways Traders Are Avoiding Crypto Taxes in India
The Indian crypto market is witnessing a surge in tax evasion, as traders find creative ways to avoid paying taxes on their digital assets. In response to the growing non-compliance, experts warn that the Indian government’s lack of digital forensic capacity and international cooperation will only perpetuate this issue.
According to recent data, India has seen a significant decline in tax deductions (TDS) from crypto-related transactions. The 42% drop in TDS collections compared to the same period last year suggests that traders are increasingly turning to offshore exchanges, peer-to-peer networks, and wallet transfers to circumvent taxes.
Offshore and Decentralized Exchanges Help Avoid Tax in India
One of the most common methods involves routing trades through unregistered foreign platforms like KuCoin, MEXC, and Gate.io. These exchanges operate outside India’s jurisdiction and are not required to comply with local tax regulations. The lack of oversight allows traders to engage in crypto transactions without triggering TDS or reporting requirements.
Peer-to-Peer (P2P) Trades Further Obscure Taxable Transactions
Another popular tactic is the use of peer-to-peer networks, particularly Binance P2P and LocalBitcoins. These platforms facilitate direct UPI or cash transactions between individuals, making it difficult for authorities to detect unreported capital gains unless suspicious patterns are flagged by banks.
Wallet Transfers and “Gifting” Used to Disguise Income
Furthermore, traders have taken to transferring crypto assets to wallets owned by family members and claiming them as non-taxable gifts under Section 56(2)(x) of the Income Tax Act. Intra-wallet transfers, especially across self-custody wallets, create layers of obfuscation, making it challenging for tax authorities to distinguish genuine asset movement from profit-booking or money laundering.
As a result, Indian authorities are pushing for stricter Know Your Customer (KYC) and anti-money laundering regulations, as well as increased global data sharing. Experts warn that India’s current enforcement framework lacks the digital forensic capabilities to track sophisticated blockchain transactions in real-time.
In response to these issues, the government is considering joining the OECD’s Crypto-Asset Reporting Framework (CARF), which requires automatic exchange of crypto KYC and transaction data between countries. Additionally, local authorities are working on new disclosure rules that require Indian citizens to declare foreign crypto holdings annually.
It seems clear that traders in India have found ways to skirt around taxes and regulators are not keeping pace with the technology.
Source: coinchapter.com
