India's Crypto Tax Regime Pushes Trading Offshore, WazirX Co-Founder Warns

India's crypto tax regime has inadvertently pushed trading offshore, claims Nischal Shetty, co-founder of WazirX and Shardeum. Despite strong adoption, the country's policy framework may be changing where Indians trade rather than reducing their interest in cryptocurrencies.

Shetty argues that the 1% Tax Deducted at Source (TDS) is affecting liquidity because it locks up capital on every trade, making high-frequency or active trading inefficient. He believes that a lower TDS would encourage more trading activity to remain within India's regulated exchanges while improving transparency and supporting long-term tax collections.

According to Shetty, the biggest mistake crypto investors make is assuming that crypto transactions don't need to be reported unless they've converted them back to INR. He stresses that crypto-to-crypto trades are also taxable events under India's tax framework.