I want to know whether the income from crypto derivatives fall under VDA tax rules or not as there are many disagreementa between CAs whether to consider it as vda or business income.
As there is no transfer of vda in derivatives transaction
Please guide me through this
Hey @Brijrajsinh123,
Welcome to the community!
The taxation of crypto derivatives (F&O) is currently a grey area, as the Income Tax Department hasn’t issued specific guidance on this yet.
A key point to understand is that VDA taxation applies only on the transfer of a Virtual Digital Asset. In crypto derivatives, there’s typically no actual transfer or ownership of the underlying crypto, since these are contracts based on price movements.
Based on this distinction, many professionals take the view that crypto derivatives, especially INR-settled contracts may be treated as business income and taxed at slab rates, rather than the flat 30% under VDA provisions. This treatment offers significant advantages: you can carry forward losses, set them off against other speculative income, claim expenses, and benefit from slab rates, whereas VDA taxation is far more restrictive.
That said, this position is not free from litigation risk, since there is no official circular from the ITD, the tax department may question this treatment in the future. In that case, you should be prepared to justify your position with proper documentation and a reasonable interpretation of the contract terms, nature of settlement, and transaction records.