Crypto Tax on Futures Trading in India: Everything You Need to Know

Cryptocurrency futures trading is gaining popularity in India. But with profits come taxes. The government has set clear rules on how these earnings are taxed. If you trade crypto futures, you must know how the tax system works. Here’s a crypto futures tax guide based on the updated tax regime.

How Are Crypto Futures Taxed in India?

The Indian government classifies cryptocurrency as a virtual digital asset (VDA). According to Section 115BBH of the Income Tax Act, profits from crypto trading are taxed at 30%. This tax applies to both spot and futures trading.

Key Points to Remember about Crypto Tax on Futures

1. Flat 30% Tax on Profits – No Matter Your Income Level

In India, profits from crypto futures trading are taxed at a flat 30% rate, regardless of how much you earn. This means that whether you make ₹1,000 or ₹10 lakh in profits, the tax rate remains the same. 

Unlike income tax slabs, where different rates apply based on income, crypto profits do not get any exemptions or lower tax rates. 

For example, if you earn ₹50,000 in profit from futures trading, you must pay ₹15,000 as tax (30% of ₹50,000), even if your total income falls under the basic exemption limit.

2. No Deductions Allowed – Only the Cost of Acquisition is Deductible

Crypto taxation under Section 115BBH of the Income Tax Act does not allow any deductions except for the cost of acquisition. This means you cannot reduce your taxable income by claiming expenses like trading fees, internet charges, or other related costs. 

For example, if you make a ₹1 lakh profit but spend ₹10,000 on trading fees, you still have to pay tax on the full ₹1 lakh. However, if you purchased a crypto asset at ₹40,000 and later sold it for ₹50,000, the acquisition cost of ₹40,000 can be deducted, and tax applies only to the ₹10,000 profit.

3. 1% TDS (Tax Deducted at Source) – Exchanges Deduct This on Transactions Above ₹50,000 (or ₹10,000 for Some Users)

A 1% TDS is applicable on all crypto trades exceeding ₹50,000 per year (₹10,000 for certain users like individuals without a business). This TDS is deducted by Indian crypto exchanges at the time of the transaction. 

For example, if you buy or sell futures worth ₹1 lakh, the exchange will deduct ₹1,000 (1% of ₹1 lakh) as TDS. This amount is deposited with the government and can be adjusted against your total tax liability when filing returns. However, if you trade on foreign exchanges, you must self-report and pay TDS manually, as they do not deduct it.

4. Losses Cannot Be Offset – You Cannot Set Off Crypto Losses Against Other Income

One of the strictest rules in India’s crypto tax policy is that losses from crypto trading cannot be used to reduce tax on other income. This means if you make a loss in crypto futures but have gains in stocks, salary, or business, you cannot adjust one against the other. 

For example, if you lose ₹50,000 in crypto futures but make ₹1 lakh from stock market trading, you must pay tax on the full ₹1 lakh, without deducting the crypto loss. Similarly, crypto losses cannot be carried forward to future years, making risk management essential for traders.

Step by Step Calculation for Crypto Tax on Futures Trading

1. Calculate your total profits from futures trading.
2. Apply the 30% tax rate on the total profit.
3. Subtract the 1% TDS deducted by the exchange (if applicable).
4. Pay the remaining tax when filing your Income Tax Return (ITR).

Example:

1. Profit from crypto futures trading = ₹1,00,000
2. Tax at 30% = ₹30,000
3. TDS deducted by the exchange = ₹1,000
4. Net tax payable = ₹30,000 – ₹1,000 = ₹29,000

If you trade on foreign exchanges, TDS is not deducted, so you must pay the full ₹30,000 tax when filing returns. You could also use the Mudrex crypto tax calculator to get accurate results.

Foreign Exchanges & Tax Implications

If you trade crypto futures on foreign crypto exchanges, TDS is not deducted automatically. This means you are responsible for:

1. Calculating and paying TDS manually (if applicable).
2. Reporting all profits in your ITR under the relevant income category.
3. Paying the 30% tax on profits before the tax filing deadline.

Failure to self-report foreign trades can lead to penalties under the Income Tax Act. The government is also increasing scrutiny on offshore crypto transactions, making compliance essential.

How to Report Crypto Futures Income on ITR?

When filing your Income Tax Return (ITR), you must declare crypto futures income under the appropriate section:

• ITR-2: If you trade occasionally and report profits as capital gains.
• ITR-3: If you trade frequently, treat profits as business income.

Steps to report crypto futures income:

1. Log in to the Income Tax e-Filing portal.
2. Select the correct ITR form (ITR-2 or ITR-3).
3. Enter total profits under ‘Income from Other Sources’ or ‘Business Income’.
4. Report TDS already deducted by Indian exchanges.
5. Calculate remaining tax due and make the payment.
6. Submit the ITR before the deadline to avoid penalties.

If you trade on foreign exchanges, you must manually report all transactions and ensure full tax compliance.

Penalties for Non-Compliance of Crypto Futures Tax

Failure to report crypto futures income or pay taxes on time can result in penalties and legal action:

• Late tax payment: Interest at 1% per month under Section 234A & 234B.
• Failure to deduct TDS: Penalty equal to the unpaid TDS amount under Section 271C.
• Non-reporting of crypto income: Fine up to ₹50 lakh or imprisonment under Section 276CC.

For example, if you owe ₹50,000 in tax but don’t pay it, you could face:

• Interest of ₹500 per month until payment
• Penalty equal to the unpaid tax
• Legal action for tax evasion

To avoid issues, always report crypto income, pay taxes on time, and keep records of all trades.

Conclusion

Managing crypto taxes can be complex, but Mudrex makes trading easier with a secure, compliant, and user-friendly platform. Want to stay updated on market trends and tax regulations? Join the official Mudrex Telegram community and connect with experienced traders. 

FAQs

1. Do you pay tax on futures trading?
Yes, profits from crypto futures trading in India are taxed at 30% under Section 115BBH. Additionally, a 1% TDS applies on trades above ₹50,000 (or ₹10,000 for some users).

2. How are futures taxed in India?
Crypto futures profits are taxed at a flat 30% rate, with no deductions except the cost of acquisition. A 1% TDS is deducted on eligible transactions by Indian exchanges.

3. Can I trade futures with crypto?
Yes, you can trade crypto futures on Indian and foreign exchanges. However, Indian platforms deduct TDS, while foreign exchanges do not, requiring traders to self-report income and pay taxes.

4. Is crypto futures trading legal in India?
Yes, crypto futures trading is legal but regulated under tax laws. Profits are taxed at 30%, and compliance with TDS rules is required for Indian exchanges.