India’s Crypto Shift as Tax Arbitrage Drives 80% to Futures Trading
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India’s crypto market has shifted to futures, which now account for about 80% of trading volume on exchanges after the 2022 budget imposed a 1% TDS on spot transactions and a 30% tax on profits that generally prevents offsetting losses. Futures and derivatives trading avoid the 1% TDS, creating tax arbitrage that favors CEX-listed futures over spot and DEX activity, but the move raises risks as 70–80% of derivatives traders reportedly lose money. The change signals rapid adoption of derivatives liquidity driven by taxation rather than product fundamentals, increasing short-term market distortion and retail risk.
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- Spot crypto transactions are hit with a 1% tax upfront, and profits are taxed at 30%.
- Crypto futures trading doesn’t trigger 1% TDS, making it more appealing for traders.
- In India, 70% to 80% of traders in the derivatives market are losing money.
Futures trading now makes up about 80% of crypto volume on Indian exchanges, a big change from previous years when spot trading dominated the market. The change is primarily attributed to tax arbitrage opportunities created by India’s crypto tax rules.
To be more precise, the main factor is the 1% TDS (tax deducted at source) rule from India’s 2022 budget. Spot crypto transactions are hit with a 1% tax upfront, and profits are taxed at 30%. Additionally, losses usually can’t be used to offset other gains.
On the other hand, crypto futures trading doesn’t trigger the same 1% TDS, which makes it a lot more appealing for a…
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