Crypto losses and set-off in India

Under India's VDA tax rules, losses from crypto cannot reduce your tax bill in the way stock market losses can. A loss from transferring a virtual digital asset cannot be set off against any other income, such as salary, business income or capital gains from shares, and cannot be carried forward to future years.

The law goes further: a loss on one VDA cannot be set off against a gain on another VDA either, and Schedule VDA requires losses to be entered as nil. So if you made ₹1 lakh profit on bitcoin and lost ₹1 lakh on an altcoin in the same year, you still pay 30% tax on the ₹1 lakh bitcoin gain.

This asymmetry makes active trading of many tokens costly: winning trades are taxed while losing trades bring no relief. Tax-loss harvesting strategies used in other countries do not work for crypto in India. Investors should factor this into position sizes and keep careful records of every transaction.