Crypto losses in India: why you can't set them off
In India, a crypto loss can't reduce tax on other crypto gains, your salary or future income. How the rule works, with examples, and what you can still do.
- Checked against the rules: Nov 2026
- Sources cited · No buy or sell calls
- Tax year 2026–27
In most of the world, a loss on one investment reduces the tax on your gains. India's crypto rules don't allow that. It's the single biggest reason Indian investors pay more tax than they expect.
The rule in plain English
Under the VDA tax regime:
- No set-off against other income. You can't use a crypto loss to reduce tax on your salary, rent, business profit or share market gains.
- No set-off between coins. A loss on one VDA can't be set off against a gain on another VDA. The tax department has made this explicit.
- No carry forward. Unlike capital losses on shares, crypto losses don't roll over to next year.
Each profitable transfer is taxed on its own at 30% plus cess. Each loss-making transfer is counted as zero.
An example
| Trade | Result |
|---|---|
| Sold Bitcoin | ₹40,000 gain |
| Sold a meme coin | ₹30,000 loss |
| Sold Solana | ₹10,000 gain |
Your net result is a ₹20,000 profit. But your taxable income is ₹50,000: the two gains added together, with the loss ignored. Tax is 30% of ₹50,000 plus 4% cess, or ₹15,600, which is more than three-quarters of what you actually made.
Run your own trades through the crypto tax calculator, which applies this rule automatically.
What about the same coin bought at different prices?
If you sell part of a holding you built up at different prices, each lot you sell is a separate calculation. Keep careful records of which lots you sold and at what cost. Indian law doesn't prescribe a single method, so choose a reasonable one, such as first-in-first-out, and use it consistently. See how to calculate crypto cost basis.
Does "tax-loss harvesting" work?
No. Selling a losing coin to cut your tax bill, common elsewhere, doesn't work in India because the loss can't be used. Selling at a loss still triggers 1% TDS, though you can claim that back. See how to get crypto TDS back.
Do I still need to report losses?
Yes. Report every transfer in Schedule VDA, entering zero as the income for loss-making rows. This keeps your return consistent with the data exchanges report to the tax department. Follow the Schedule VDA guide.
What about hacks, scams and lost funds?
Losing coins to a hack, a scam or a collapsed exchange doesn't create a deductible loss under the VDA rules. Keep all records, police complaints and communications anyway. They matter for any recovery process, such as the WazirX recovery scheme.
Is this likely to change?
The crypto industry has repeatedly asked the government to allow losses to be set off and to cut TDS. Budget 2026 kept the rules unchanged. For the latest, see India's crypto regulation status.
Frequently asked questions
Can I set off crypto losses against stock market gains?
No. Crypto losses can't be set off against any other income, including capital gains on shares.
My total crypto result for the year is a loss. Do I pay tax?
You may still owe tax if any individual transfer made a gain. Only if every transfer made a loss is your crypto tax zero.
Do I need to file an ITR if I only made losses?
Filing is still wise if you sold crypto, especially to claim back TDS and keep your records consistent.
Can crypto losses be carried forward?
No. Losses on crypto can't be carried forward to later years.
Can a loss on one coin reduce tax on another coin's gain?
No. Each profitable transfer is taxed on its own, and losses on others are ignored.
Sources
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