What Are Crypto Futures And Why They Outshines Spot Trading in India

The Indian market is experiencing an aggressive transformation with the growing preference of retail investors for crypto futures over spot trading. As of now, they are accounting for nearly 70-80% of trading volumes, the trend underscores the impact of taxation policies, leverage opportunities, and loopholes in the regulations that are altering investment behaviour and creating opportunities and risks.

Futures Take Over Indian Exchanges

Less than a year ago, Indian exchanges began rolling out perpetual futures, a product once limited to global platforms. Since then, trading volumes have surged, with futures now making up the bulk of overall activity. According to Moneycontrol data , futures trading contributes between 70% and 80% of volumes, far outpacing spot markets.

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Why Crypto Futures Are More Attractive Than Spot

Due to the Heavy Tax Burden on Spot Trading, Spot crypto transactions in India face significant taxation under the 2022 Union Budget rules:

• 1% TDS (Tax Deducted at Source) under Section 194S.

• 30% tax on all Virtual Digital Asset (VDA) gains under Section 115BBH.

• 18% GST on trading fees (introduced July 2025).

This combination has made spot trading unattractive for retail investors.

Tax Grey Area in Crypto Futures

By contrast, this trading does not currently attract Crypto Taxes of 1% TDS or the 30% VDA tax . Investors only pay standard trading fees without the heavy tax load, making it a cost-effective and more profitable option. This loophole is the key reason traders are migrating from spot to futures.

The Lure of High Leverage

Futures trading in India provides a leverage of 10x to 100x that allows traders to take large positions with small capital. As an example, trades of Rs 100,000 can be managed at the cost of Rs 1000. This possibility of high returns has given rise to myriad retail investors.

But leverage adds to the dangers - the losses may be larger than the investment. Reserve Bank of India (RBI) has been concerned that unregulated leveraged trading may lead to instabilities in the markets and destroy the savings of inexperienced traders.

Research and Retail Frenzy

A 2023 survey by the National Institute of Public Finance and Policy (NIPFP) found that 65% of Indian traders preferred it because it is treated favorably by the taxation system. In 2025, the trend has accelerated, with retail investors accounting for the lion's share of participants. This implies that taxation, not innovation, is driving adoption.

Regulatory Grey Zone

Currently, crypto Futures& Options (F&O) trading in India is in a regulatory grey area. While spot trades are heavily regulated and taxed, future are not clear under the Indian tax law. This disparate policy has inadvertently created incentives for risky behavior and has pushed inexperienced traders into risky products. Experts say that regulators will have to act quickly to balance investor protection with market growth.

Conclusion

This enhancement is a gold rush in India, an immediate consequence of the overtaxation of spot transactions. Tax savings and high leverage attract retail investors, but at the same time, they pose greater risks in an unregulated setting. Lack of policy clarity will lead to the instability of the crypto market in India, making it difficult to consider the country as a sustainable investment ecosystem. Read the Indian OECD Crypto Taxation Rules applicable from 2027