Imagine you buy Bitcoin for ₹50,000 and sell it later for ₹80,000. You make a ₹30,000 profit. Under normal tax rules, that’s taxable. But what if you also lost ₹70,000 on another trade this year? In most countries, you’d net those out - pay tax only on your real gain of ₹10,000. In India? You still pay tax on the full ₹30,000. The ₹70,000 loss? Gone. No offset. No carry-forward. Not even a footnote.
What the No Loss Offset Rule Actually Means
India’s crypto tax law, under Section 115BBH of the Income Tax Act, doesn’t just treat crypto differently - it treats it like a punishment box. The rule says: crypto losses cannot be used to reduce crypto gains. That’s it. No exceptions. Not even if you lost ₹1 lakh and only made ₹5,000. You still pay 30% on the ₹5,000. And if you made ₹10,000 in one trade and lost ₹9,000 in ten others? Still pay 30% on ₹10,000. The losses vanish. This isn’t just unusual. It’s extreme. No other major asset class in India works this way. With stocks, you can offset losses against gains. You can even carry forward losses for up to eight years. Crypto? No. Not even close.How the 30% Tax and 1% TDS Stack Up
The 30% tax on crypto gains isn’t the only burden. Every time you trade - even if you’re just swapping Bitcoin for Ethereum - the government takes 1% of the total transaction value as TDS. That’s Tax Deducted at Source. It’s automatic. If you trade ₹50,000 worth of crypto, ₹500 is taken before you even see your money. And this applies whether you made a profit or lost everything. Worse, you can’t deduct anything beyond the original purchase price. Gas fees, exchange fees, wallet costs, even the cost of using a tax tool - none of it counts. So if you spent ₹2,000 on transaction fees across 20 trades and lost ₹50,000 overall, you still owe tax on every single gain, with no way to reduce it.Real-Life Example: The Math That Breaks Traders
Let’s say you’re an active trader in India. Here’s your year:- Trade 1: Bought ETH for ₹40,000, sold for ₹70,000 → ₹30,000 gain
- Trade 2: Bought SOL for ₹60,000, sold for ₹30,000 → ₹30,000 loss
- Trade 3: Bought BTC for ₹80,000, sold for ₹100,000 → ₹20,000 gain
- Trade 4: Bought ADA for ₹25,000, sold for ₹10,000 → ₹15,000 loss
Your total losses: ₹45,000
Your net gain: ₹5,000 But under Indian law, you pay 30% tax on ₹50,000 - that’s ₹15,000. You also paid 1% TDS on every trade: ₹1,150 total. So you paid ₹16,150 in taxes on a net profit of just ₹5,000. You’re out of pocket ₹11,150 after taxes. And your ₹45,000 in losses? They don’t matter. They don’t exist for tax purposes.
What About Theft, Hacks, or Lost Keys?
Lose your crypto to a hack? Forget it. The law doesn’t care. If your wallet gets drained, or you misplace your seed phrase, that’s a personal loss. Not a tax loss. No deduction. No relief. You paid tax on gains earlier, and now you can’t recover anything. The government doesn’t recognize loss unless it’s a sale. And even then, only if you made a profit. This is why many traders avoid trading entirely. Why take the risk if the system only punishes you when you win? Experts at CoinSwitch and Dinesh Aarjav & Associates say this rule is driving traders away from regulated exchanges. Some are turning to peer-to-peer trading, but that brings its own risks - like the 20% Tax Collected at Source (TCS) if you send money abroad through the Liberalised Remittance Scheme.Why This Rule Doesn’t Work for Traders - or the Government
The government claims this rule prevents tax evasion and brings crypto into the formal economy. But the results tell a different story. Trading volumes on Indian exchanges have dropped. Traders are either quitting or moving to offshore platforms. Those who stay are spending hours on record-keeping - tracking every transaction, every timestamp, every fee. Many hire crypto tax consultants just to file their ITR-2 or ITR-3, because ITR-1 doesn’t even let you report crypto. And here’s the irony: the 1% TDS already collects money upfront. The 30% tax on gains collects more. But because losses are ignored, the system becomes a tax machine that doesn’t care about real outcomes. It taxes activity, not profit. That’s not tax policy - it’s a transaction tax disguised as capital gains.
What’s Changing in 2025?
Budget 2025 didn’t ease anything. It made it worse. Now, if you didn’t report your crypto holdings before February 1, 2025, the government can tax you at 60% - retroactively. That’s not a penalty. That’s a trap. And there’s no appeal process. If you’re caught, you pay. No negotiation. No leniency. Tax advisors warn that this is creating a culture of fear, not compliance. Traders are hiding assets. They’re using foreign wallets. They’re avoiding cash-outs. And the government? It’s still collecting TDS on every transfer - even if the trader is breaking even or losing money.What Can Traders Do?
There’s no magic fix. But there are a few strategies:- Track everything. Use crypto tax software. Export all transaction history. Save screenshots of purchase receipts.
- Avoid small trades. Every trade triggers TDS. If you’re just swapping between coins to ride volatility, you’re paying more in fees than you’re gaining.
- Consider futures. Crypto futures aren’t classified as VDAs, so they’re not subject to the 30% tax or TDS. But they’re riskier and still taxable under different rules.
- Don’t use Indian exchanges for large holdings. If you’re holding long-term, consider offshore wallets - but be aware of TCS risks if you bring money back.
Is There Any Hope for Change?
Industry groups keep pushing for reform. They argue that a loss offset rule would make crypto trading fairer, encourage compliance, and actually increase long-term tax revenue. But the government shows no sign of backing down. The 2025 budget confirmed it: this isn’t a temporary experiment. It’s the new normal. For now, crypto traders in India are stuck with a system that taxes wins and ignores losses. It’s not just unfair. It’s economically irrational. But until the law changes, traders have to play by the rules - even when the rules don’t make sense.Can I offset crypto losses against my salary or business income in India?
No. Under India’s current tax law, crypto losses cannot be used to reduce any other type of income - not salary, not business income, not capital gains from stocks. Losses from Virtual Digital Assets (VDAs) are locked in their own category and cannot be used anywhere else.
Do I pay tax if I lose crypto in a hack or scam?
No tax deduction is allowed. If your crypto is stolen, lost, or hacked, the Indian tax authorities do not recognize this as a taxable loss. You cannot claim it on your return, even if you reported the incident to police or your exchange.
What happens if I don’t report my crypto trades?
You risk being taxed at 60% under Section 158B for undisclosed holdings, with penalties and interest added. The government can also initiate prosecution for willful evasion. Since July 2022, exchanges report transaction data to the tax department, so unreported activity is easily detected.
Can I carry forward crypto losses to next year?
No. Unlike stocks or business losses, crypto losses in India cannot be carried forward to future financial years. They expire at the end of the fiscal year. This makes crypto one of the only asset classes in India with zero loss carry-forward benefits.
Is staking or airdrops taxed in India?
Yes. Staking rewards and airdrops are treated as income when received, taxed at your slab rate. Later, if you sell them, you pay 30% capital gains tax on the profit. You’re taxed twice - once as income, once as capital gain - with no deductions for any costs involved.
Do I pay TDS on peer-to-peer crypto trades?
Yes. Since July 2022, anyone buying crypto from another person (P2P) must deduct 1% TDS if the total value exceeds ₹10,000 in a year. The buyer is legally responsible for depositing this tax with the government, even if the seller is not registered with an exchange.
Comments
15 Comments
Brooklyn Servin
This is insane. I’m a crypto trader in the US and I can’t even fathom paying tax on $50K in gains while ignoring $45K in losses. That’s not taxation, that’s extortion. 🤯 India’s government is basically saying, ‘We don’t care if you lost money - pay up anyway.’ No other asset class works like this. Why is crypto being treated like a crime?
Phil McGinnis
It’s simple. India doesn’t need to encourage speculation. Crypto is gambling dressed up as investing. If you can’t handle the volatility, don’t play. The state isn’t here to bail you out of bad decisions. Stop whining about losses - they’re a feature, not a bug.
Ian Koerich Maciel
It is, without question, a profoundly regressive and economically counterproductive policy. The imposition of a 30% capital gains tax on gross gains, coupled with a 1% TDS on every transaction, regardless of profitability, creates a disincentive to participate in a nascent and volatile market. Furthermore, the non-recognition of losses - whether realized or otherwise - violates fundamental principles of income taxation. One must ask: is the objective revenue generation, or behavioral suppression?
Andy Reynolds
Y’all know what’s wild? This rule doesn’t just hurt traders - it hurts innovation. Startups building crypto tools in India? They’re getting squeezed. Devs are leaving. Investors are running. And for what? To collect a few extra rupees now, while killing the future of Web3 here? We need to stop punishing people for trying. If you want real compliance, make it fair. Let losses offset. Let people breathe. Crypto isn’t going away - but India might miss the boat if it keeps acting like this.
Alex Strachan
So let me get this straight… I lose $100K, but if I make $10, I pay 30% on the $10? And the $100K? Poof! Like magic! 🎩✨
Meanwhile, the government’s collecting TDS on every single trade like a vending machine that only takes your money and gives you nothing back. Congrats, India - you’ve invented the world’s first crypto tax Ponzi scheme. 😂
Rick Hengehold
This isn’t about fairness. It’s about control. The government wants visibility, not cooperation. If you trade, you pay. No exceptions. No loopholes. No mercy. That’s the rule. Adapt or exit.
dayna prest
Actually, this rule is brilliant. It stops people from gaming the system with wash trades and fake losses. You think other countries are saints? The US lets you offset, but they also audit you into oblivion. At least India’s clear: no tricks. Pay on gains. Period. Stop pretending you’re being oppressed.
Brandon Woodard
Let’s be real - this policy is a trap disguised as policy. The government doesn’t want crypto to thrive. They want to extract every last rupee while pretending they’re regulating. And guess what? It’s working. People are leaving. Exchanges are shrinking. The real losers? The honest traders who followed the rules. This isn’t taxation - it’s punishment.
Antonio Snoddy
Think about it - this isn’t just a tax law. It’s a metaphysical statement. The state says: ‘Your losses are not real. Only your gains matter. Only your profit is worthy of acknowledgment.’ In a world where we’re told to embrace impermanence, to accept the ebb and flow of markets, India says: ‘No. You must only celebrate the peaks. The valleys? They are sins. Erased. Forgotten. Unseen.’
Is this capitalism? Or is this a cult of profit worship? Where did we lose the idea that risk is part of the game? That loss is not failure - it’s data? We are not machines that only count profits. We are humans who trade, who feel, who lose - and yet, the state refuses to see it. That’s not policy. That’s alienation.
Ryan Husain
I get the intent - bring crypto into the formal economy. But this approach is self-defeating. If traders are forced to go offshore or use P2P to avoid TDS, the government loses even more control. A better path: allow loss offset with strict reporting. Reward compliance, don’t punish it. The 1% TDS is already a powerful tool - combine it with fairness, and you get real adoption. Otherwise, you’re just creating a black market with more paperwork.
Rajappa Manohar
bro i trade on binance in india… pay 30% on 50k gain even tho i lost 70k… tds on every trade… i just stopped trading. too much stress. also my friend lost 20k in hack… no claim possible. government dont care. just take money.
nayan keshari
Everyone crying about losses? You think the government cares? They made this rule to scare people away. And it’s working. Good. Crypto is a scam anyway. Let the gamblers go to Dubai.
Alison Hall
Just use crypto futures - they’re not classified as VDAs. Yeah, riskier, but at least you’re not getting taxed on every tiny swing. And track EVERYTHING. I use Koinly - saved my sanity. You got this 💪
Amy Garrett
so i lost like 60k this year but made 8k… paid 2400 in tax… and now i’m broke 😭 but at least i filed… my mom says i’m a fool for trading crypto… maybe she’s right
Haritha Kusal
im from india and i still trade… its hard but i believe in crypto… one day the law will change… until then i just trade small and use offshore wallets… its risky but better than paying tax on losses 😔
Write a comment