Crypto India: 80% of Crypto Trading in India Is Now Futures. Is the 1% TDS to Blame?
| Metric | Percentage |
|---|---|
| Futures Share of Indian Crypto Trading | Over 80% |
| Crypto Volume Migrated Offshore | Roughly 72% |
| Crypto Derivatives Participants with Losses | 70% to 80% |
| Retail Share of Futures Activity | About 70% |
| Flat Tax on VDA Gains | 30% |
| Tax Deducted at Source (TDS) on Spot | 1% |
India's crypto market has undergone a quiet structural inversion. Futures and derivatives now account for over 80% of total trading volume on domestic exchanges, while spot trading , once the default entry point for retail investors , has been relegated to a sideshow. The primary driver is not a sudden appetite for leverage, but a deliberate tax arbitrage rooted in the 1% Tax Deducted at Source (TDS) introduced in the 2022 Union Budget.
The mechanics are straightforward. Spot crypto trades trigger a 1% TDS on every transaction, locking up working capital and rendering high-frequency strategies uneconomical. Futures contracts, by contrast, involve no direct transfer of a virtual digital asset, allowing traders to sidestep the levy entirely. Combined with the flat 30% tax on VDA gains , which prohibits loss set-offs , derivatives offer a significantly more favorable tax treatment. Industry data suggests that roughly 72% of India's total crypto volume has already migrated offshore to avoid these rules entirely.
Yet the volume boom conceals a painful ledger. Internal data from Indian platforms indicates that 70,80% of crypto derivatives participants are sitting on losses, with retail investors driving about 70% of futures activity and absorbing the bulk of the damage. Some domestic exchanges offer leverage up to 100x , twenty times the 5x cap SEBI imposes on equity derivatives , with no formal rulebook governing position limits, margin disclosures, or investor protections.
Industry executives have pushed for TDS relief ahead of Budget 2026, arguing the levy has drained onshore liquidity without meaningfully improving tax compliance. Their pleas were rejected. The government kept both the 30% tax and the 1% TDS intact, instead introducing new penalties for reporting lapses. Meanwhile, the RBI has formally backed a prohibition on private cryptocurrencies, while the Parliamentary Standing Committee on Finance prepares to table its long-awaited report on virtual digital assets.