The cruelest feature of India's crypto tax regime is the no-offset rule. Lose ₹5 lakh on a memecoin, gain ₹5 lakh on USDT P2P, you owe 30% on the ₹5 lakh gain — the loss is invisible.
Within crypto
Section 115BBH(2) says 'no deduction in respect of any expenditure (other than cost of acquisition) or allowance shall be allowed' and 'no set off of loss from transfer of the virtual digital asset...shall be allowed against income computed under any other provision of this Act'.
Plain reading: each profitable trade stands alone; each losing trade is ignored.
Against other income
You cannot use crypto losses to reduce your salary tax, capital gains on stocks, business income, or anything else. The loss has nowhere to go and no future to live in (no carry-forward).
Workarounds people try (and why they don't work)
Some traders attempt to recharacterise losses as 'cost of acquisition' on a different position via wash-sale-style swaps. The IT Department's litigation position is that this fails 115BBH(2)(b) because the wash isn't a real economic loss — and tax authorities have started identifying these patterns in audit.
Key takeaways
- Crypto losses cannot offset crypto gains, salary, or any other income.
- No carry-forward, no indexation, no exceptions.
- Wash-sale-style workarounds are increasingly flagged.
- Plan position-sizing knowing this — the asymmetry punishes high-turnover trading.
