Crypto Loss Set-Off in India: Can You Carry It Forward?
You make ₹1,00,000 on one coin and lose ₹1,00,000 on another. You finish the year at exactly zero. The tax department still expects about ₹31,200.
You cannot set off a crypto loss against any gain or income, and you cannot carry it forward to next year. Every profitable sale is taxed at 30% (plus 4% cess) on its own. A loss still has to be reported, and any extra 1% TDS can be claimed back as a refund when you file.
That is not a glitch. It is how crypto is taxed in India. If you hoped a losing trade would shrink your tax bill, this guide shows what the law allows, what it does not, and the one thing a loss can still do for you: get your TDS back.
What does the law say about crypto losses?
Crypto is a Virtual Digital Asset (VDA) in Indian tax law. Income from transferring a VDA is taxed under Section 115BBH.
The Income Tax Department's page on Section 115BBH sets three rules:
Rule | What it means for you |
Flat 30% tax on gains | No slab benefit. 4% cess is added on top. |
Only cost of acquisition is deductible | Exchange fees, internet, electricity and advisor fees cannot be claimed. |
No set-off, no carry-forward | A loss cannot reduce any other income, and it lapses at the end of the year. |
Shares work differently. A stock-market loss can be set off against other capital gains and carried forward for 8 years if you file on time. Crypto gets none of that.
Can I offset a loss on one coin against a gain on another?
No. A loss on Ethereum cannot reduce your profit on Bitcoin. The Act does not spell out "coin against coin" in those words. The position comes from the Finance Ministry's clarification, and every transfer is computed on its own.
New Act, same rule. The Income-tax Act, 2025 applies from 1 April 2026, and section numbers change. The 30% rate and the no-set-off rule carried over. Sales made up to 31 March 2026 (FY 2025-26) are still taxed under the 1961 Act, even if you file later.
How much extra tax does the no-set-off rule cost?
One financial year, three trades:
Trade | Profit/loss |
Bitcoin | +₹60,000 |
Solana | +₹20,000 |
Dogecoin | -₹45,000 |
Real profit | ₹35,000 |
Tax in practice: Only gains count, so 30% of ₹80,000 = ₹24,000, plus 4% cess = ₹24,960
Tax if losses could be netted: 30% of ₹35,000 plus cess = ₹10,920
Extra cost of the rule: ₹14,040. You hand over about 71% of your real profit as tax.
Surcharge is not included and would apply at higher income levels.
Doesn't the 1% TDS already cover this?
No. TDS under Section 194S is an advance deduction of 1% on the sale value, not on profit. It starts once your yearly sales cross ₹10,000, or ₹50,000 for "specified persons" (certain individuals and HUFs). It is not a separate tax. It is credited to your PAN and adjusted when you file.
Because it is charged on the sale amount, it is often cut even on trades where you lost money. If your final tax is lower than the TDS already paid, you claim the difference as a refund. A refund needs a filed return. BuyUcoin's crypto tax guide step-by-step covers the TDS side in more detail.
Do I still have to report trades that made a loss?
Yes. Schedule VDA in ITR-2 and ITR-3 asks for each transfer: dates, cost and sale value. A loss row gives no tax relief, but leaving it out can cause a mismatch with the TDS and exchange data the department already holds. Exchanges also have a legal duty to report crypto transactions from 1 April 2026, with penalties for platforms that fail to do so. Our guide to reporting crypto in your ITR walks through each Schedule VDA field.
Missed the 31 July 2026 due date for FY 2025-26? You can still file a belated return until 31 December 2026 with a late fee, or an updated return later.
What can I do to reduce the damage?
You cannot beat the rule, but you can plan around it:
Do not sell a loser just to "save tax". It saves nothing. Sell only if your view on the coin has changed.
Treat each profit as fully taxable. Your losing positions give no cushion when you book gains.
Avoid needless coin-to-coin swaps. A swap is a transfer. If the coin you give up has gained, you owe tax even though no rupees reached your bank.
Keep fees low and records clean. Fees are not deductible, so cost leakage matters more. Download each order invoice and your TDS certificates.
Start small. Size positions knowing a loss will not come back through tax. BuyUcoin's beginner's guide to buying crypto in India explains how to begin with a small amount.
Ask a CA about edge cases. Many trades, swaps, P2P deals or a business-style setup need personal advice. Filing as a business in ITR-3 does not unlock set-off either.
What if my coins crashed to zero or were stuck on a collapsed exchange?
If you did not sell or transfer them, the law sees no transfer, so there is no loss to claim. This is a grey area and depends on your facts. Speak to a Chartered Accountant before you file.
Pros and cons of the current rule
Pros | Cons |
Simple: one rate, no holding-period maths | You can owe tax in a year when you lost money overall |
Stable: the rate and loss rules have not changed since 2022, and Budget 2026 left them alone | Losses have no value, now or later |
Easy to predict: 30% on each gain, same for everyone | Fees and other costs cannot be deducted |
Excess TDS is refundable on filing | Active traders and swappers are hit hardest |
Conclusion
Crypto losses in India are final. They do not offset gains, they do not offset other income, and they do not carry forward. What you can recover is the extra 1% TDS, and only by filing your return.
So treat every sale as its own tax event, keep clean records and size trades knowing a loss will not return through the tax system. If you want to begin small, you can open a BuyUcoin account. BuyUcoin is registered with FIU-IND as a reporting entity (RE No. VA00031103). Crypto is high-risk and you can lose money.
FAQs
1. Can crypto losses be carried forward in India?
No. A VDA loss lapses at the end of the year. Section 115BBH allows no carry-forward to later years.
2. Can I set off a loss on one coin against a gain on another?
No. Each transfer is computed separately, so even two VDAs cannot be netted. This follows the Finance Ministry's clarification.
3. Can crypto losses be set off against salary or share-market gains?
No. A VDA loss cannot reduce income under any other provision of the Act.
4. Do I pay tax if I have an overall loss for the year?
Yes, if any single trade made a profit. Each gain is taxed on its own at 30% plus cess.
5. Will my 1% TDS be refunded if I lost money?
Yes, if your final tax is lower than the TDS deducted. You claim it by filing your return.
6. Do I have to report loss-making trades?
Yes. Schedule VDA asks for every transfer. Reporting keeps your return in line with AIS and TDS data.
7. Does a coin-to-coin swap count?
Yes. A swap is a transfer. Any gain on it is taxable, even though no rupees reached your bank.
8. Can I deduct exchange fees?
No. Only the cost of acquisition is allowed. Whether a buy-side fee can be added to your cost is something to confirm with your CA.
9. What if I lose crypto in a hack or scam?
If there is no transfer, there is usually no deductible loss. Get advice from a CA on your facts.
10. Did Budget 2026 or the new Income-tax Act change these rules?
No. The 30% rate and the no-set-off rule carried over. Section numbers change from 1 April 2026. The new penalties apply to platforms that fail to report.
Source: Income Tax Department, Government of India, “Taxation of Virtual Digital Asset (VDA)” explainer on incometaxindia.gov.in
Disclaimer: This is general information, not tax, legal or investment advice. Rules and thresholds can change, so confirm the latest position on the Income Tax Department website or with a Chartered Accountant. Crypto products are unregulated and can be highly risky. There may be no regulatory recourse for losses.