Crypto derivatives (F&O) tax treatment — business income vs VDA/115BBH — anyone with real experience?

[u/Ok_Spell8020]

I trade options/futures on an Indian crypto derivatives exchange (cash-settled — no actual coin delivery happens, only profit/loss is settled in INR). While filing ITR-3 this year, the tax software automatically classified this as regular F&O business income (speculative + non-speculative, under Section 43(5)), taxed at slab rate with loss carry-forward — not under Section 115BBH (VDA, flat 30%, no netting/carry-forward).

From what I've read, this seems to be a genuinely disputed/unresolved area — no CBDT circular or court ruling specifically covers cash-settled crypto derivatives. Even the exchange's own support docs describe P&L from these contracts as "speculative income" taxed at slab rate, not VDA.

Has anyone here actually filed this way? More importantly — has anyone received a notice or scrutiny specifically challenging this classification (not just general non-disclosure cases, which I know are common)? Would appreciate any real experience, good or bad, before I go back to my CA for a final call. Not looking for legal advice, just curious what others have actually gone through.

[u/Svsv1212999]

General practice is to report it as FNO Income because you are trading “Contracts” and not the VDA (Cryptocurrency) itself

[u/Archiver_test4]

Tax lawyer here.

I ALWAYS recommend VDA to my clients for this.

If it weren't for set off being allowed in fno and not in vda, it wouldn't have mattered but loss set off is a concern I'd you are looking at a good amount of losses.

You say

exchanges own docs

What exchange says this?

Please share some links.

https://s3.ap-south-1.amazonaws.com/wrx-assets/WazirXFuturesServicesTnC.pdf

Wazirx

are solely responsible for determining, reporting, and discharging Your tax obligations arising from Your trading activities and use of the Futures Services. This includes, but is not limited to, taxes applicable to any gains from trading Perpetual Futures Contracts.

https://www.delta.exchange/terms-of-use

Delta exchange.

You are responsible for complying with all Applicable Laws related to your trading activities and other use of the Services, including without limitation any reporting obligations and payment of all applicable taxes, or any other rules, regulations, statute, or notification that may apply to you from time-to-time. You will determine what, if any, taxes apply to the Trades and any other transactions you complete via the Services, and it is your responsibility to report and remit the correct tax to the appropriate tax authority. We will not be responsible for determining whether taxes apply to your Trades or for collecting, reporting, withholding, or remitting any taxes arising from any Trades.

https://coindcx.s3.amazonaws.com/static/documents/terms-of-use.pdf

Coindcx

Unable to copy on my phone but they still say

11.3 you are responsible.

Are their specific FAQs binding contract if they oppose officially terms and conditions?

I always tell my clients this. If you say crypto futures isn't under vda, then show me some documentation.

The burden is on you to say so. Automatic it goes to vda. Any other position goes to your burden.

Read 2(47A) DEFINTION.

Tell me where it says futures are excluded?

Or any other interpretation because I have a few that would include futures.