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Understanding Tax On Crypto Futures Trading In India

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.

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 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 major 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.

Traditional Futures VS Crypto Futures In India

Derivative trading is a type of trading in which contracts are based on the underlying value of an asset. These contracts can be used to hedge risk or speculate on the asset’s future price. It is among the most active trading segments in the Indian equity market. 

Indeed, derivatives trading in India stands out as one of the largest and most active globally. All thanks to its effective regulations and robust safety measures by the Securities and Exchange Board of India (SEBI), which regulates derivatives trading in India. 

Futures and options are the most common derivatives traded in India. Futures contracts are agreements to buy or sell an asset at a predetermined price on a future date. Options contracts give you the right, but you won’t be under any obligation to buy or sell an asset at a predetermined price on or before a future date. 

However, the situation varies when it comes to trading crypto futures. It is a relatively new type of trading in India, so SEBI does not regulate such futures trading. To engage in crypto futures trading, it’s important to note that you can’t use Indian Rupees (INR). 

You must first convert your INR into USDT stablecoin to participate in crypto futures trading. This is because many crypto futures markets operate with crypto/USDT trading pairs, making USDT the primary currency for trading.

To understand the distinctions between traditional and crypto futures, let’s study the following table: 


Traditional Futures

Crypto Futures

Regulated by


Not regulated by SEBI

Contract expiry



Settlement method

Physical delivery of asset or cash settlement

Cash settlement

Leverage available






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 ₹50,000 under Section 194S. Hence, if you transfer a cryptocurrency to another person, and the transfer value exceeds ₹50,000, 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.

Here Is An Example Of How The Crypto Tax Is Calculated

Suppose you buy 1 Bitcoin for ₹10,000 and sell it for ₹20,000 one year later. Your profit from the sale is ₹10,000. So, you must pay a 30% tax on this profit plus a 4% cess. Consequently, your total tax liability will be ₹3,400.

In addition, if you transfer the Bitcoin to another person, and the transfer value exceeds ₹50,000, the cryptocurrency exchange will deduct 1% tax from the transfer amount and deposit it with the government.

It is important to note that the crypto tax is new, and the government still needs to issue detailed implementation guidelines. As a result, there is some uncertainty about how the tax will be applied in some instances. If you are a cryptocurrency investor, it is essential to consult with a tax advisor to ensure you comply with all applicable tax laws.But how do you calculate the taxation of futures and options in India?

How To Calculate Your Taxes From Crypto Futures Trading?

Computing taxes on profits from crypto futures trading in India is quite simple. As mentioned earlier, when you change your Indian Rupees (INR) into USDT stablecoin to participate in crypto futures trading, you won’t face any immediate tax obligations. However, when you eventually convert your USDT back into INR, taxes come into play.

Now, let’s consider a scenario where you’ve earned a profit over a specific period and want to convert that profit, which is in USDT, back into INR. In this case, you’ll be required to pay a 1% TDS on the transaction amount and a 30% tax on your gains during that specific timeframe.

Let’s say you’ve profited 800 USDT from your initial trading capital of 920 USDT while engaging in crypto futures trading. When you convert this USDT into Indian Rupees (INR), you must sell your USDT stablecoin crypto on the spot market in exchange for fiat INR. At this point, two important things come into play:

30% Tax On Profits 

You will incur a 30% tax on your profits (in addition to a 4% cess). It’s worth noting that this tax cannot offset any losses you may have incurred from trading other cryptocurrencies.

1% TDS (Tax Deducted At Source)

You’ll also face a 1% TDS charge on the transaction value of the USDT you’re converting into fiat INR. This TDS amount can be claimed back at the end of the financial year.

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. 

Since the crypto tax laws are still evolving in India. Therefore, crypto traders and investors must stay updated with such tax laws. However, calculating crypto taxes can get a bit tough. However, you can use KoinX, an automated crypto tax computing software, to ease the process. So why wait? Create an account on KoinX today and simplify your income tax on futures and options.