Why Are Indian Traders Flocking to Crypto Futures Over Spot Deals?
By Sugata Ghosh, ET Bureau
Mumbai, August 26, 2025 — In the rapidly evolving Indian cryptocurrency market, an interesting shift is taking place. Crypto futures trading has surged ahead of spot deals across local exchanges, signaling a growing preference among Indian traders for derivatives over direct purchases of virtual digital assets (VDAs).
The Rise of Crypto Futures in India
Crypto futures volumes on Indian platforms have notably outpaced spot trading volumes, with futures trading clocking in at three times or more than spot transactions on major exchanges. This trend has been propelled by several compelling factors:
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Potential for Higher Profits: Futures allow traders to leverage their investments heavily, with exposure ranging from 10 to over 50 times their margin amount. This is significantly higher than leverage typically seen in stock futures and far more than spot trading where buyers pay the entire amount upfront. Globally, some crypto exchanges offer leverage of up to 100 times.
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Lower Tax Burden: While spot transactions in crypto attract a 1% tax deducted at source (TDS) on sale proceeds regardless of profit or loss, futures trades currently do not incur TDS since no actual transfer of VDAs takes place. Furthermore, profits from futures are taxed as "income from other sources" based on income slabs, enabling many traders to reduce their tax liability compared to the flat 30% tax applied on spot crypto gains.
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Ease of Margins in Indian Rupees (INR): Domestic platforms now accept margins in INR, making futures trading more accessible and convenient. When traders deposit margin INR, exchanges convert these funds into stablecoins like USDT through counterparties in global markets such as Binance, thus facilitating access to larger international futures liquidity pools.
What Exactly Are Crypto Futures?
Crypto futures are derivative contracts where traders agree to buy or sell a cryptocurrency at a predetermined price at a future date. Unlike spot trading where ownership of the actual asset changes hands instantly, futures contracts allow speculation on price movements without immediate transfer of the underlying digital assets. This structure gives rise to significant leverage and greater profit or loss potential but also increased risk.
The Impact of Taxation on Trading Behavior
India’s tax policy has become a decisive factor driving traders toward futures. The current tax regime imposes a 1% TDS on crypto spot transactions as per Section 194S of the Income Tax Act, deducted even if the transaction results in a loss. However, futures trading escapes this levy because the TDS applies only to transfers of VDAs, and futures contracts do not involve such transfers.
Cryptocurrency lawyer Purushottam Anand elaborates, “When the margin for a VDA futures trade is denominated in INR, the profit or loss depends on the price movement of the underlying asset. But since the investor is not directly buying or selling the VDA itself, no transfer occurs, so TDS does not apply.”
Additionally, because cryptocurrencies are not legally recognized as currency or securities under Indian law, crypto derivatives have been treated differently. Gains from futures are taxed under the head “income from other sources,” potentially allowing traders to distribute earnings among family members in lower tax brackets and reduce overall tax dues.
Regulatory Scrutiny and Future Outlook
Despite the growth in trading volumes, crypto exchanges in India do not publicly disclose daily trade data, though estimates suggest that the top half-dozen platforms handle futures volumes ranging from $3 to $5 million daily. Recently, some exchanges have taken to social media and over-the-top (OTT) platforms to advertise crypto futures, bringing more visibility to this trading segment.
In parallel, the Central Board of Direct Taxes (CBDT) has initiated fact-finding on crypto derivatives, cross-border VDA transactions, and clarity on the definition of virtual digital assets. This move hints at a possible regulatory framework in the coming months aimed at overseeing crypto derivatives more closely.
Emerging Trend: Crypto Options
Besides futures, a few Indian crypto exchanges have also started offering options trading — another form of derivatives allowing traders to bet on the price movement of cryptocurrencies with predefined contracts.
Conclusion
The convergence of greater profit potential, tax advantages, and domestic currency margin acceptance has made crypto futures an attractive avenue for Indian traders amid the still-unregulated crypto market. As regulatory authorities examine the sector more closely, the landscape for crypto derivatives in India may undergo significant transformation, potentially affecting how traders and exchanges operate.
For now, futures trading stands as a growing frontier within India’s crypto ecosystem, drawing both seasoned traders and newcomers eager to maximize returns while navigating the unique tax and legal contours of the space.
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Related Topics: Cryptocurrency Trading, Crypto Futures Taxation, Virtual Digital Assets, Leverage Trading, Indian Crypto Market