If your crypto is stolen in an exchange hack, drained by a fake app or lost to a “guaranteed returns” scam, Indian tax law gives you nothing for it. The loss can’t reduce tax on your salary, can’t cut the tax on a crypto gain you made the same year, and can’t be carried forward. You simply absorb it.
That is the plain reading of section 115BBH of the 1961 Act, which became section 194 of the Income-tax Act, 2025 from 1 April 2026.
Why a theft isn’t even a “loss” for tax
Section 115BBH taxes income “from the transfer” of a virtual digital asset. Sub-section (2) then shuts every door: no deduction except cost of acquisition, no set-off of any loss in computing that income, and no set-off or carry-forward of a crypto transfer loss against anything else.
A hack or scam adds a second problem. Tax commentators such as Trade Brains point out that a theft is not a voluntary transfer under section 2(47), so it doesn’t create a capital loss at all. Koinly’s India guide notes the Income Tax Department has issued no specific guidance on stolen crypto, and that claiming the loss is very unlikely to succeed. Either way the result is the same: zero relief.
The WazirX case, in rupees
India’s biggest real example is WazirX. About $230 million was stolen in July 2024. Under the restructuring, users were promised a first distribution of about 85.25% of their balances’ dollar value, paid in tokens. The scheme became effective on 15 October 2025, with Recovery Tokens meant to pass on any further recoveries over time. In the August 2025 revote, 149,559 creditors holding $206.9 million of approved claims took part.
Now take one user with a ₹1,00,000 claim who also sold some bitcoin that year at a ₹50,000 profit.
| Amount | |
|---|---|
| Claim on the exchange | ₹1,00,000 |
| First distribution at 85.25% | ₹85,250 |
| Unrecovered loss | ₹14,750 |
| Separate bitcoin gain the same year | ₹50,000 |
| Tax on that gain at 31.2% (loss ignored) | ₹15,600 |
| Tax if the loss could be set off (it can’t) | ₹10,998 |
The ₹4,602 gap is the price of India’s no-set-off rule for this one user. A listed-share investor with the same ₹14,750 capital loss could set it off against other capital gains and carry it forward for up to eight years. Our crypto loss set-off calculator shows the same effect for your own numbers.
What it means for Indian investors
- Prevention is the only tax shelter. Since a loss gets no relief, the full hit lands on you. Use exchanges on the FIU-IND list (check with our registered exchange checker), buy hardware wallets only from the maker or an authorised seller (how to check a Ledger), and treat any “fixed daily return” offer as a scam.
- Keep the paper trail. File a complaint on the national cyber-crime portal or with the police, and save exchange notices, scheme documents and the date and value of every token you get back.
- Recoveries are a grey area. There is no CBDT guidance yet on how tokens received in a restructuring are taxed, or what cost applies when you later sell them. Note the rupee value on the day you receive them and ask a chartered accountant before filing.
- Report what you sold. Any crypto you did sell still goes in Schedule VDA, with 31.2% on each gain on its own. Our crypto tax calculator does that maths.
BtcMedia verdict
India taxes crypto gains in full and ignores crypto losses, and a hack or scam is the harshest version of that rule because the loss doesn’t even count as a transfer. Until the law changes, security is worth more to an Indian holder than any tax planning.
How we calculated this: 85.25% recovery from WazirX’s published rebalancing figure; tax at 30% plus 4% cess on a ₹50,000 gain (₹15,600) and on ₹35,250 (₹10,998); calculated 30 October 2026, 7 PM IST. Example amounts are illustrative.
FAQ
Can I claim stolen crypto as a loss in my ITR? No. Section 115BBH (section 194 of the 2025 Act) allows no set-off or carry-forward of crypto losses, and a theft is generally not treated as a transfer, so no capital loss arises.
Does a hack loss reduce tax on my other crypto profits? No. Each crypto gain is taxed on its own at 31.2%, whatever you lost elsewhere in the same year.
Is money recovered from a hacked exchange taxable? There is no official guidance yet. Record the date and rupee value of everything you receive and take a chartered accountant’s advice.
This article is for information only and is not financial or tax advice.