Crypto losses in India: can you set off or carry forward?

For many Indian crypto investors, the most painful part of the tax rules is not the 30% rate. It is discovering that losses don't count. If you are sitting on losing positions, or planning to "book losses to save tax" as you might with shares, read this first.

Key takeaways

• Losses from transferring crypto (VDAs) cannot be set off against salary, business, capital gains or any other income.
• A loss on one crypto cannot be set off against a gain on another crypto, even in the same year.
• VDA losses cannot be carried forward to future years.
• You should still report losing transactions in Schedule VDA, and you can claim credit for any 1% TDS deducted.
• Tax-loss harvesting, which works for shares, gives no tax benefit for crypto in India.

What the law says

Since 1 April 2022, income from transferring a Virtual Digital Asset has been taxed under a special regime (section 115BBH of the Income-tax Act, 1961, carried into the Income-tax Act, 2025 from 1 April 2026). Three features matter for losses:

1. Gains are taxed at a flat 30% plus 4% cess and any surcharge.
2. No deduction is allowed except the cost of acquisition. Exchange fees treated as expenses, internet costs and advisory costs are not deductible.
3. A loss from a VDA transfer cannot be set off against any other income and cannot be carried forward. The Finance Act 2022 clarified that "any other income" includes gains from other VDAs.

In practice, each profitable transfer is taxed on its own. See our full crypto tax guide for the wider picture.

Worked examples (illustrative)

Example 1: gain on one coin, loss on another

You make a ₹1,00,000 profit selling Bitcoin and a ₹60,000 loss selling an altcoin in the same year. Your net result is ₹40,000, but tax is charged on the full ₹1,00,000 gain: 30% = ₹30,000, plus 4% cess = ₹31,200. The ₹60,000 loss is ignored.

Example 2: loss on crypto, gain on shares

You lose ₹50,000 on crypto and make ₹50,000 of short-term gains on shares. The crypto loss cannot reduce your share gains. The share gains are taxed under the normal capital-gains rules.

Example 3: loss this year, gain next year

You lose ₹80,000 on crypto this financial year and make ₹80,000 next year. Because losses cannot be carried forward, next year's ₹80,000 is fully taxable.

Try your own numbers with our crypto tax calculator, and see how to calculate crypto gains for tax for more on cost of acquisition.

What about losses within the same coin?

The rules are applied transfer by transfer. If you bought the same coin at different prices and sell part of it, how you match purchase lots to the sale affects your gain. Many practitioners use a consistent method such as first-in, first-out (FIFO). Whatever you use, apply it consistently and keep records. A loss on one sale of a coin still cannot reduce a gain on another sale in the way it would under normal capital-gains rules.

Why "tax-loss harvesting" doesn't work for crypto

With shares, investors sometimes sell losing positions before 31 March to offset gains and then buy back. For crypto in India this gives no tax benefit, because the loss can't be used. Worse, the sale and repurchase may attract 1% TDS on each transfer, tying up cash until you claim it back. Selling a losing coin can still make sense for investment reasons, just not for tax reasons.

Should you still report losses?

Yes. Report every VDA transfer, including loss-making ones, in Schedule VDA of your ITR with the date of acquisition, date of transfer, cost and sale value. There are good reasons to do this:

• Exchanges report transactions, and 1% TDS appears in your Form 26AS and Annual Information Statement (AIS). Mismatches can trigger notices.
• You can claim credit for the TDS deducted on loss-making sales. If your total TDS exceeds your tax liability, you may get a refund.
• New reporting obligations and penalties for crypto transactions apply from April 2026, so accurate records matter more than ever.

Our step-by-step guide on how to file crypto taxes in your ITR covers the forms, and our explainer on the 1% TDS explains how credits work.

Practical ways to live with the no-set-off rule

• Trade less. Every profitable trade is taxed on its own while losing trades give no relief, so high-frequency trading is structurally penalised.
• Size positions carefully. Because losses can't soften your tax bill, risk-first position sizing matters more.
• Keep clean records of every buy, sell, swap and transfer between wallets, with INR values. A portfolio tracker helps you see cost and profit or loss per coin, and live INR prices help you value holdings at year-end.
• Get professional help if you have many trades, futures or offshore activity; the treatment of derivatives and business income can differ.

Frequently asked questions

Can I set off crypto loss against crypto gain in India?

No. A loss on one VDA cannot be set off against a gain on another VDA, even within the same financial year. Each gain is taxed at 30% on its own.

Can crypto losses be carried forward in India?

No. Losses from transferring VDAs cannot be carried forward to future years.

Do I need to show crypto losses in my ITR?

Yes, you should report all VDA transfers, including losses, in Schedule VDA. It keeps your return consistent with exchange and TDS data, and lets you claim credit for TDS deducted.

Can I get a refund of TDS if I made a loss on crypto?

The 1% TDS is credited against your total tax liability for the year. If total tax paid, including TDS, exceeds what you owe, the excess can be refunded after you file your return.

Is crypto loss adjustable against salary income?

No. VDA losses cannot be set off against salary or any other head of income.

This guide is educational and general in nature. It is not investment, tax or legal advice, and nothing here is a guarantee of any return. Crypto is volatile and you can lose money; only invest what you can afford to lose.

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This article is AI-assisted, educational and general in nature. It is not financial advice and never a guarantee of profit. Every trade is at your own risk on your own exchange. See our risk disclosure and editorial policy.