Crypto traders on Reddit asked what sounds like the same question, but each received a different answer.
One wanted to know why anyone would trade crypto futures if losses cannot be set off against gains. Another had a CA who said crypto futures profits are taxed as business income at slab rates, not at 30%. A third was told by Delta Exchange that its INR-settled futures attract neither the 30% VDA tax nor the 1% TDS.
Both were trying to answer the same practical question: how are crypto futures actually taxed in India?
The problem is that crypto futures do not all work the same way. Some contracts settle in crypto. Others settle entirely in INR. That distinction can completely change the tax treatment. In one case, profits may fall under the VDA regime with a flat 30% tax and strict loss-setoff restrictions. In another, they may be treated as business income and taxed at normal slab rates.
That is why traders can hear two completely different tax answers, and both can be correct. The key is what exactly is being traded and how the contract settles when the position closes.
Trader 1: “Why Would Anyone Trade Crypto If Losses Can't Be Offset?”
The first trader had been vaguely aware that crypto losses could not be offset against gains, but had not fully absorbed what that meant in practice until he sat down to work out his tax for the year. Then it hit him. And his reaction was the same as almost every active futures trader when they first understood it properly: this cannot be right.
Here is what he was reacting to.
Under Section 115BBH of the Income Tax Act, every profitable crypto trade is taxed at 30% plus 4% cess. Every losing trade gives you nothing back. The profitable trades and the losing trades live in completely separate tax universes. You cannot add them together, net them out, or use the losses as any kind of offset.
What this means in practice: say you had a good quarter and a bad quarter.
Period | What happened | Tax consequence |
July to September | ₹8 lakh in profitable closes | ₹2,40000 owed in tax |
January to March | ₹6 lakh in losing closes | ₹0 relief. Losses disappear. |
Net result for the year | ₹2 lakh profit | ₹2,40,000 tax owed
|
You made ₹2 lakh. You owe ₹2.4 lakh in tax.
His second question was whether ChatGPT’s suggestion to file as business income was legitimate.
The answer: it depends entirely on what kind of futures you are trading and on which platform. Which is exactly what the other two traders discovered through their own routes.
Trader 2: “My CA Said It’s Business Income. How True Is That?”
The second trader had a CA who told him that profits from crypto futures are not taxed at 30%, and that only INR-to-USDT and USDT-to-INR conversions attract the flat VDA rate. Everything else, the perpetual contracts, the futures closes, the position management, should be filed as business income at normal slab rates.
The CA is not wrong, but the advice is incomplete without a crucial detail.
The legal argument behind the business income position is real. Section 115BBH applies to the transfer of a virtual digital asset. A transfer, under the Income Tax Act, requires that the asset actually change hands. In a USDT-settled perpetual contract on Binance or Bybit, what changes hands at settlement is USDT, and USDT is itself a VDA. So, a VDA transfer arguably occurs, and the conservative legal position is that Section 115BBH applies.
But here is where the CA’s advice could be right. If the trader is using a platform where the contracts settle in INR, with no crypto changing hands at any point, the “transfer of a VDA” argument becomes much harder to sustain. In that structure, you never hold the crypto. You never dispose of it. You put up an INR margin, reference a price, and receive or pay INR at close. There is a credible argument that no VDA transfer occurred, and therefore, Section 115BBH does not apply.
The CA who said “only INR-to-USDT conversions attract 30%” was drawing an imprecise line around a real distinction. The actual line is: contracts in which crypto or a crypto-equivalent (such as USDT) changes hands are more likely to fall under Section 115BBH. Contracts where only INR changes hands are more likely to fall outside it.
Whether that line applies to any specific trader depends on which platform they are using.
The Thread Running Through Both The Cases
Two different questions, two different starting points, but one common problem underneath: the law was written with spot crypto trading in mind, and nobody explicitly wrote down what happens when a derivative contract references crypto prices without ever touching crypto itself.
That gap is what produces both the traders with different answers from different sources, all of whom have some legitimate basis for what they were told.
The simplest way to understand where you stand is to ask one question about your own trading: Does the contract you are trading ever require you to hold, receive, or deliver actual crypto at any point?
Contract type | Crypto changes hands? | Likely tax treatment | Loss set-off? |
BTC/USDT perpetuals on Binance or Bybit | Yes – USDT received at settlement | Section 115BBH more likely | No |
INR-settled futures on Delta Exchange India | No – only INR moves | Business income more likely | Yes |
Spot BTC or ETH purchase and sale | Yes – crypto directly | Section 115BBH, confirmed | No
|
If your answer is no, the business income argument is available to you. If your answer is yes, the Section 115BBH treatment is the conservative and defensible position.
This does not mean you make the decision yourself. It means you go to a CA with a clear understanding of which type of contract you are trading, and you ask them to document the reasoning for whichever position they recommend before you file.
What You Need Before Filing Futures Income
What both the traders need is a CA who has read the specific contract documentation for the platform they use and can document the reasoning behind the position they recommend.
Generic advice, however confidently delivered, is not enough here.
The CA also needs the actual numbers before they can document anything. This is where the practical problem sits. Binance Futures, Bybit, and Delta Exchange all produce transaction histories in formats that were not designed for Indian tax reporting. A CA who receives a raw exchange export has to manually identify which trades were profitable, which were losing, what the gross figures were on each side, and whether the activity needs to go into Schedule VDA or the business income section, before they can even begin drafting the position. That reconstruction takes time and costs money, and it increases the risk of error.
Sign up on KoinX to simplify crypto tax calculations across exchanges.
Joining KoinX is the step that removes this problem. KoinX pulls the full transaction history from Binance, Bybit, or Delta Exchange, automatically separates futures activity from spot trading, and produces gross profitable closes and gross losing closes as independent figures – the exact split a CA needs to decide which regime applies and to document why.
Once the report is generated, it can either feed directly into the income tax portal under Schedule VDA for the Section 115BBH route or be handed to a CA as the structured P&L record for the business income route.
If you prefer end-to-end help, KoinX’s bundle plan assigns a dedicated CA who works from the same report, no back-and-forth over exports.
KoinX separates futures and spot activity for accurate tax reporting.
The platform does not make the legal decision about which regime applies. That belongs to the CA, informed by the specific contract documentation of the platform you trade on. What KoinX ensures is that the CA arrives at that decision with accurate, separated numbers rather than a pile of raw data to untangle first, which is the difference between a CA conversation that takes an hour and one that takes two weeks.
For the complete framework of India’s VDA tax rules, the crypto tax India guide covers every provision. For TDS credit claims and filing deadlines, the TDS return filing and payment due dates guide covers the instalment schedule and the Section 194S reconciliation process.
