If you traded crypto in India and made losses on some coins while profiting on others, you'd naturally assume the losses cancel out part of the gains. That's how it works with stocks, right? Well, here's the thing — crypto doesn't play by those rules. Not even close.
Section 115BBH of the Income Tax Act has what might be the single harshest provision in Indian crypto taxation: you cannot set off crypto losses against anything. Let me break this down so you know exactly what you're dealing with.
What Does "No Loss Set-Off" Actually Mean?
In plain language, it means every profitable trade is taxed independently, and your losing trades are completely ignored by the tax department. The losses don't reduce your taxable income at all.
Let's say you had this kind of year:
- You bought Bitcoin at ₹15,00,000 and sold it at ₹17,00,000 — that's a ₹2,00,000 profit
- You bought Ethereum at ₹1,20,000 and sold it at ₹70,000 — that's a ₹50,000 loss
- You bought a memecoin for ₹30,000 and it went to zero — that's a ₹30,000 loss
Your net position? You're only up ₹1,20,000 overall. But the Income Tax Department doesn't care about "net position." Under 115BBH, you owe 30% tax on the full ₹2,00,000 profit. That's ₹60,000 in tax, plus 4% cess, bringing it to ₹62,400. The ₹80,000 in losses? Completely invisible to the taxman.
How This Differs from Stock Market Taxation
This is where it really stings. If you trade stocks and mutual funds, the rules are far more generous:
- Short-term stock losses can be set off against both short-term and long-term capital gains
- Long-term stock losses can be set off against long-term capital gains
- Carry forward — unused stock losses can be carried forward for up to 8 assessment years
With crypto? None of that applies. You can't offset crypto losses against crypto gains. You can't offset them against stock gains. You can't offset them against your salary, rent, or business income. And you absolutely cannot carry them forward to next year. The loss simply dies the moment the financial year ends.
A Side-by-Side Example
Imagine two traders — Priya trades stocks, Rahul trades crypto. Both made ₹5,00,000 in profits and ₹3,00,000 in losses during FY 2024-25.
Priya (stocks): Taxable gain = ₹5,00,000 - ₹3,00,000 = ₹2,00,000. She pays tax on ₹2,00,000.
Rahul (crypto): Taxable gain = ₹5,00,000 (losses ignored). He pays 30% on ₹5,00,000 = ₹1,50,000 + cess. The ₹3,00,000 loss vanishes.
Same economic outcome, wildly different tax bills. That's the reality of 115BBH.
What About Losses on Different Crypto Assets?
I've seen many traders confused by this. They assume that even if you can't offset against salary or stocks, surely you can offset one crypto against another? Like, your BTC gain against your ETH loss?
No. Section 115BBH(2) is explicit — no loss from the transfer of a Virtual Digital Asset (VDA) shall be set off against income from any other source. "Any other source" includes other VDAs. So your ETH loss cannot reduce your BTC gain. Each profitable transaction stands alone.
Can You Carry Forward Crypto Losses?
Again, no. Section 115BBH(2) also blocks carry-forward of VDA losses. If you made a ₹10,00,000 loss on crypto this year, that loss is gone forever. You can't use it next year, or the year after, or any year. Compare this with stock market losses where you get 8 years of carry-forward — the difference is brutal.
The Common Mistake That Gets You a Tax Notice
Here's what actually happens in practice. A trader has ₹2,00,000 profit on Bitcoin and ₹1,50,000 loss on Ethereum. They report a net gain of ₹50,000 in their ITR. They pay ₹15,000 tax and think they're done.
Then the AIS (Annual Information Statement) data gets processed. The department sees ₹2,00,000 in sale proceeds on Bitcoin. They expect 30% tax on ₹2,00,000. The filed return shows only ₹50,000 taxable. A mismatch notice under Section 143(1)(a) or a demand notice shows up.
Now the trader has to pay the remaining ₹45,000 in tax, plus interest under Section 234A/234B/234C, and potentially a penalty. All because they assumed netting was allowed.
What About Intra-Day or Same-Token Trades?
There's one nuance worth understanding. If you buy ETH at ₹1,00,000, it drops to ₹70,000, and you sell — that ₹30,000 loss cannot offset other gains. But if you buy 1 ETH at ₹80,000, buy another at ₹1,20,000, and sell 1 ETH at ₹1,10,000 — your cost basis depends on which unit you're selling (typically FIFO — First In, First Out). The gain or loss on that specific transaction is computed individually.
The key point: the cost of acquisition for each transaction matters, but losses from one transaction still can't offset gains from another.
Strategies to Work Within These Rules
Given how harsh the rules are, what can you actually do?
- Don't book losses just for tax purposes — since they don't help you, there's no "tax-loss harvesting" strategy in Indian crypto taxation
- Be selective about profit booking — if you have unrealized gains, think about whether you want to trigger the 30% tax this year
- Track your cost basis carefully — the only deduction allowed under 115BBH is the cost of acquisition. Make sure you're claiming the correct purchase price for every sale
- Use CryptoITR to compute per-transaction gains — since each trade is taxed independently, you need accurate per-trade calculations, not just a net P&L figure
The Bottom Line
Section 115BBH is unforgiving. Every rupee of crypto profit you book is taxed at 30%, regardless of how much you lost on other trades. There's no netting, no carry-forward, and no exceptions. The only way to handle this properly is to calculate gains on each individual transaction and report the total taxable gains accurately.
If you've been filing your returns by netting gains and losses, you should review past returns and consider filing a revised return before the deadline. CryptoITR calculates your tax exactly the way the law requires — per-transaction, with no illegal netting — so you never get a surprise notice.