Can You Offset Crypto Losses Against Gains? Here’s What the Law Says

Crypto trading comes with risks, and losses are a part of the game. But can you offset these losses against gains to reduce your tax burden? India’s tax laws have strict rules on this—let’s break them down.

Can You Offset Crypto Losses Against Gains in India?

India’s crypto tax laws under Section 115BBH do not allow loss adjustment. 

Unlike stocks, where losses can offset gains, crypto losses cannot be set off or carried forward. This means that 

1. Losses from One Crypto Trade Cannot Reduce Tax on Profits from Another

Section 115BBH(2)(b) clearly states that losses from the transfer of virtual digital assets (VDAs) cannot be set off against profits from other VDAs. This means if you make a loss in one crypto trade, you cannot use it to reduce tax liability on a profitable trade.

Example: If you earn ₹1.5 lakh profit from Bitcoin but lose ₹80,000 on Ethereum, you still have to pay tax on the full ₹1.5 lakh. The ₹80,000 loss is ignored for tax calculations.

2. Profits Are Taxed at 30%, Even If Other Trades Resulted in Losses

As per Section 115BBH(1), any income from the transfer of VDAs is taxed at 30%, plus applicable surcharge and cess. Even if you incur losses in other trades, the government does not allow adjusting them against gains.

Example: Suppose you earn ₹2 lakh profit on Dogecoin but lose ₹1 lakh on Solana in the same financial year. You still pay 30% tax on ₹2 lakh (₹60,000 tax), and the ₹1 lakh loss does not reduce this amount.

3. Crypto Losses Cannot Be Set Off Against Salary, Stock Gains, or Business Income

According to Section 115BBH(2)(a), losses from crypto cannot be adjusted against any other income source, such as salary, stock market gains, or business revenue. This differs from stocks, where long-term capital losses can be offset against capital gains.

Example: If you make a ₹1 lakh loss in crypto but earn ₹5 lakh from salary and ₹50,000 from stocks, your total taxable income remains ₹5.5 lakh. The crypto loss does not reduce your tax burden on salary or stocks.

4. Losses Cannot Be Carried Forward to Future Years

Unlike capital losses in stocks or mutual funds, Section 115BBH(2)(b) specifies that crypto losses cannot be carried forward to future financial years. This means once the financial year ends, any crypto loss is permanently ignored for tax purposes.

Example: If you lose ₹2 lakh in crypto trading this year but make ₹3 lakh profit next year, you still pay tax on the full ₹3 lakh. The previous year’s ₹2 lakh loss cannot be adjusted to lower your tax liability.

Conclusion

India’s crypto tax laws under Section 115BBH leave no room for loss adjustments—you pay 30% tax on every profitable trade, no matter how much you’ve lost elsewhere. Since losses can’t be set off or carried forward, smart tax planning is essential. Using platforms like the Mudrex app can help track profits, losses, and optimize trade execution. For insights on managing crypto taxes effectively, join the Mudrex Official Telegram Community and stay updated with expert discussions.

FAQs

1. Can crypto losses be set off against crypto gains?
No, as per Section 115BBH(2)(b) of the Income Tax Act, losses from one crypto trade cannot be used to offset profits from another. Each profitable trade is taxed at 30%, regardless of losses incurred elsewhere.

2. Can you write off crypto losses against gains?
No, crypto losses cannot be written off against gains. Unlike stocks, where capital losses can offset capital gains, India’s tax laws do not allow such adjustments for Virtual Digital Assets (VDAs).

3. Can you offset crypto losses against tax?
No, crypto losses cannot reduce your taxable income. Even if you incur losses in one trade, you must pay 30% tax on all profitable trades, as per Section 115BBH.

4. Can you offset losses against capital gains?
No, crypto losses cannot be set off against capital gains from stocks, mutual funds, or any other asset class. Section 115BBH(2)(a) restricts loss adjustment to only crypto, and even within crypto, set-offs are not permitted.