Understanding Tax On Crypto Futures Trading In India

Understanding Tax On Crypto Futures Trading In India
Understand the tax implications of crypto futures trading in India, including the tax rate and TDS requirements.

Understanding your tax obligations in crypto futures trading is essential, regardless of whether you are a new or experienced trader. Crypto futures are derivatives contracts that allow traders to speculate on the future price of a cryptocurrency. But does it attract crypto taxation in India? Let’s find out! 

The government has implemented several tax regulations on cryptocurrencies, including crypto futures trading. These tax rates on futures and options in India can be confusing and complex.

Therefore, this article will provide an overview of the tax implications of crypto futures trading in India and discuss the different types of taxes that apply to crypto futures traders and the specific tax rules that govern crypto futures transactions. It will also highlight some tax planning strategies that crypto futures traders can use to minimise their tax liability. Let’s begin!

What Is Crypto Future Trading?

Crypto future trading is a way of speculating on the price of cryptocurrencies without actually owning them. It involves using futures contracts, which are legal agreements to buy or sell an asset in the future at a predetermined price. In crypto, it means agreeing to buy or sell a particular cryptocurrency at a specific price in the future, regardless of the market price when the time comes.

Such trading can be done on Binance Futures, Bybit, or BitMEX. These platforms offer different crypto futures contracts, such as perpetual or quarterly contracts and USDT or coin-margined instruments. Crypto future trading can be used for various purposes, such as hedging, arbitrage, or leverage. But what are these? Let’s find out.


Hedging is when you use crypto futures to protect yourself from adverse price movements in the spot market. For example, if you own some Bitcoin and expect the price to drop in the future, you can sell Bitcoin futures contracts to lock in your profits and avoid losses.


Arbitrage is when you exploit price differences between different markets or platforms. For example, if you see that Bitcoin futures are trading at a higher price on one platform than another, you can buy low and sell high to make a profit.


Leverage is when you use borrowed funds to amplify your returns or losses. For example, if you expect the price of Bitcoin to rise in the future, you can buy Bitcoin futures contracts with a small percentage of your own money and a significant percentage of borrowed money. Hence, you can increase your exposure, potential profits, and risks.

Additionally, it is a complex and risky activity that requires knowledge, skills, and discipline. You should be aware of the factors that affect the price of cryptocurrencies, such as supply and demand, news and events, regulations and policies, taxation of futures and options, etc. 

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How Are Cryptocurrencies Taxed In India?

Cryptocurrencies are categorised as virtual digital assets (VDAs) in India and are subject to taxation under the Income Tax Act 1961. As per Section 115BBH, the tax rate for gains from trading VDAs is 30% plus 4% cess, i.e.,  if you sell a cryptocurrency for a profit, you must pay 30% tax plus an additional 4% cess.

Moreover, a 1% Tax Deducted at Source (TDS) has also been introduced for crypto transfers exceeding INR 10,000 and, in some cases, INR 50,000 under Section 194S. Hence, if you transfer a cryptocurrency to another person, and the transfer value exceeds INR 10,000, the cryptocurrency exchange will deduct 1% tax from the transfer amount and deposit it with the government.

The crypto tax applies to all investors, including individuals, companies, and trusts. This means that all types of investors who profit from trading cryptocurrencies will be liable to pay taxes on their profits.

How To Calculate Your Taxes From Crypto Futures Trading?

Computing taxes on profits from crypto futures trading in India is complicated. When you exchange your Indian Rupees (INR) into USDT stablecoin to participate in crypto futures trading, you won’t face any immediate tax obligations.

Business Income

Upon realising a profit from trading, this profit is categorised as business income. The taxable amount is determined based on the conversion rate at profit realisation. This taxable income is then subject to the individual’s applicable tax slab rate.

30% Tax On Profits

In most cases, you trade in futures using USDT, so when converting the total amount of USDT (including both principal and profit) back into INR, the taxation is divided into two components:

Note: A few exchanges allow crypto futures trading in INR.

Tax on the Principal Amount

The principal amount is the sum you paid to buy the initial USDT tokens invested in futures trading.

The taxable gain on the principal amount is calculated based on the difference between the conversion rate and the initial purchase rate. This amount is subject to taxation at the applicable rate, plus any surcharges and cess. 

Tax on the Profit Amount

Similarly, the taxable gain for the profit amount (the value of additional USDT you gained) is determined based on the difference between the present conversion rate and the rate at which the profit was realised. This amount is also subject to taxation at the applicable rate and any applicable surcharges and cess.

1% TDS (Tax Deducted At Source)

In futures trading, TDS applies when you sell USDT after the realised PnL. The buyer deducts it from the selling value of the token in INR or any other cryptocurrency. This TDS amount can be claimed back at the end of the financial year.

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Tax On Crypto Futures Calculation

Kapil purchased 1000 USDT at INR 85 each to begin trading in crypto futures. A year later, he earned a profit of 2000 USDT from this initial investment. When realising the profit, the USDT price was INR 86. Later, when he decided to cash out the profit, the USDT price had risen to INR 86.5 per USDT. Here’s how the taxation works for Kapil:

Initial Purchase of 1000 USDT @ INR 85

No tax is applicable as this is considered an investment without any immediate taxable event.

Profit of 2000 USDT

This profit is treated as business income calculated at INR 86 per USDT, totalling INR 172,000. The tax on this amount will be based on Kapil’s applicable income tax slab rate. This amount also sets the cost basis for tax purposes.

Conversion of 3000 USDT into INR (Principal + Profit)

On The Initial 1000 USDT (Principal):

  • Taxable gain: (INR 86.5 – INR 85) * 1000 = INR 1,500

  • Tax payable: 30% of INR 1,500 = INR 450 (plus applicable surcharge and cess).

On The Remaining 2000 USDT (Profit):

  • Taxable gain: (INR 86.5 – INR 86) * 2000 = INR 1,000

  • Tax payable: 30% of INR 1,000 = INR 300 (plus applicable surcharge and cess).

Total Tax Liability

  • Income tax on futures trading profit (INR 172,000) at the applicable slab rate.
  • The 30% tax on the gain from converting USDT to INR: INR 450 + INR 300 = INR 750 (plus applicable surcharge and cess).

Effortless Crypto Tax Reporting With Koinx

You must track your profits and losses to calculate your taxes from crypto futures trading. You can do this using a crypto tax calculator such as KoinX. It is an automated tax-calculating software that supports multiple exchanges and wallet integrations. 

You must connect your account to KoinX, which will do your task. It calculates capital gains and losses based on the latest tax rules and regulations. You can export your tax report in various formats and file it with your preferred tax authority.

Moreover, it lets you see how your crypto transactions affect your tax liability in real time. You can also simulate different scenarios and optimise your tax strategy before trading.


Every investor and trader must grasp the tax on futures and options in India. According to the Income Tax Act, any income generated from futures and options trading is considered business income, regardless of how often or much you trade. The Indian government has also imposed a 30% tax on gains from crypto transactions and a 1% TDS on transactions above INR 50,000 after realized PnL.