India’s crypto market is moving toward futures as the 1% TDS limits capital available for spot trading. Reports indicate that derivatives now account for 80% or more of trading volume on domestic platforms. Investors also face specific rules for taxable gains, loss set-offs, TDS credits, and income-tax reporting.
The Income-tax Act, 2025 took effect on April 1, 2026. However, returns for Assessment Year 2026-27 cover income earned during Financial Year 2025-26. Those returns remain governed by the Income-tax Act, 1961.
Income from transferring a virtual digital asset is taxed at 30%. Applicable surcharge and a 4% health and education cess could raise the final amount. The rate applies to taxable VDA income rather than the full sale value.
Only the cost of acquiring the asset could normally reduce taxable income. Trading fees and other expenses are not allowed under the VDA calculation. The rule also blocks the set-off of losses.
However, crypto losses in India cannot reduce income from another source. Schedule VDA also requires a loss-making transaction to be entered as nil. Positive amounts from other transfers remain taxable.
The 1% TDS on crypto applies when consideration is paid to a resident for a qualifying VDA transfer. The annual threshold is ₹50,000 for a specified individual or Hindu Undivided Family. It is ₹10,000 for other payers.
Moneycontrol reported on July 15, 2026, that futures account for 80% or more of volume on domestic crypto exchanges. The figure came from exchanges and industry participants. It was not described as official government data.
The report estimated daily transaction values near $5 billion. Individual investors were said to generate about 70% of crypto futures activity. These estimates show that retail traders are driving much of the change.
Cash-settled futures give traders exposure to price movements without a standard transfer of the underlying token. Industry reports say these contracts do not face the same transaction-level TDS applied to spot trades.
The tax difference does not make futures safer. Internal platform data cited by Moneycontrol suggested that 70% to 80% of participants were losing money. The figures were supplied by local platforms and were not official government statistics.
Some smaller platforms reportedly offer leverage of up to 100 times. Leverage allows a trader to control a position larger than the margin deposited.
The crypto futures tax India position remains less defined than the rules for spot VDAs. CBDT Chairman Ravi Agrawal said in February 2026 that crypto derivatives were presently not taxed and needed further study.
That statement did not create a permanent exemption. It also did not set a filing method for every futures or perpetual contract. Future rules may depend on product design, settlement, and further government guidance.
Moneycontrol reported that many tax professionals treat crypto futures profits as speculative business income. That view may permit different loss rules from the VDA regime. However, it is not a specific official rule for every contract.
Also, there is no proper regulation system set up for private cryptocurrency assets in India. According to Reuters, there were concerns regarding foreign exchanges, private wallets, valuation, and reporting.
A crypto TDS refund could be claimed in case the deductions made are more than the actual tax burden. This is because the amount of deductions is based on sale prices without taking into account the acquisition price.
A loss on one transaction does not guarantee a refund. The taxpayer first reports all taxable transfers and calculates the total liability. Available TDS credit is then adjusted against that amount.
Investors should compare exchange statements with Form 26AS before crypto ITR filing. The deductor’s name and credited amount should match the return. The Income Tax Department provides a tax credit mismatch service for differences.
The consideration received from the transfer reported in Schedule VDA should match the related TDS record. Missing income or inconsistent transaction values may raise questions during processing. Errors should be corrected before filing where possible.
A validated bank account is needed to receive an approved refund. The e-filing portal allows taxpayers to pre-validate and nominate an account. A name mismatch, invalid IFSC, or closed account could delay payment.
Schedule VDA requires transaction-wise reporting for each taxable transfer. Taxpayers enter the acquisition date, transfer date, cost of acquisition, consideration received, and income category. A loss is reported as nil under the official instructions.
For individuals, Schedule VDA appears in ITR-2 and ITR-3. ITR-2 could apply where there is no business or professional income. ITR-3 applies where such income forms part of the return.
Related: Best FIU-Registered Crypto Platforms in India: Features, Risks & Tax Rules
