Smart Traders Turn to Crypto Perps to Escape TDS on Virtual Digital Assets
Many savvy traders in India are exploring a new futures product called ‘crypto perps’ as a way to avoid the high Tax Deducted at Source (TDS) imposed on virtual digital assets (VDAs). These crypto perps, also known as perpetual cryptocurrency futures, do not have an expiry date and are being offered by select service providers in a low-key manner. While the trade volumes are not disclosed, several high-net-worth individuals (HNIs) are betting on these perps to take advantage of the potential tax benefits they offer.
This trend is emerging as many crypto enthusiasts in India have either left the market or shifted their positions to offshore exchanges due to high taxes and banks’ reluctance to process crypto payments. By trading crypto perps, investors can take positions on assets using a small margin amount without actually buying or selling the underlying cryptocurrency. Traders believe that since these futures contracts are separate from virtual digital assets under the Income Tax Act, they may not be subject to the 1% TDS. This could allow them to offset profits against losses and potentially lower their tax obligations.
The Potential Benefits and Risks of Crypto Perps
When trading crypto perps, the margin is paid in USDT, a type of stable coin, instead of cash. This means that 1% TDS is deducted when purchasing USDT for use as futures margin. The leverage in perp trades can go up to 20, allowing traders to take positions that are 20 times the margin value. However, it’s important to note that these trades involve a high degree of risk and potential for both great profits and losses.
Vikram Subbura, CEO of Giottus, a crypto exchange not offering futures, explains that futures are favored by some Indian traders who are willing to take on further risks in the crypto market. Overseas exchanges often provide higher leverage options, and local platforms in India source liquidity from these international platforms.
Overall, while crypto perps offer potential tax advantages for traders in India, they come with significant risks. It’s essential for individuals considering these trades to carefully evaluate their investment objectives, level of experience, and risk appetite.
Hot Take: Exploring Crypto Perps as an Alternative to TDS on Virtual Digital Assets
As taxes and regulatory hurdles continue to impact the Indian crypto market, some traders are turning to crypto perps as a potential solution. These perpetual cryptocurrency futures offer the possibility of escaping the 1% TDS imposed on virtual digital assets. While still in a nascent stage and not widely marketed, crypto perps have attracted interest from high-net-worth individuals (HNIs) who understand the risks involved. By leveraging these futures contracts, traders hope to offset profits against losses and reduce their tax liabilities. However, it’s crucial to approach these trades with caution, as they carry a high degree of risk and volatility. As the crypto market evolves, it remains to be seen how regulators will respond to this emerging trend.
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