I Made Money on Some Crypto and Lost on Others – Can I Set Off the Losses?
Summary: The content explains that Virtual Digital Assets (VDAs), including cryptocurrencies and NFTs, are taxed under Section 115BBH of the Income-tax Act, 1961. Gains from each VDA are taxed at a flat 30% plus 4% cess, irrespective of the taxpayer’s slab or holding period. Losses on one VDA cannot be set off against gains from another VDA or any other income, and only the acquisition cost is deductible, with no deduction for fees, interest or software costs. It further states that a 1% TDS under Section 194S applies on the sale value of VDA transfers once the prescribed annual threshold is crossed, and this TDS is treated as a prepayment that can be claimed as credit or refunded. The content advises reporting all VDA transactions in Schedule VDA, noting that AIS already contains the transaction data, maintaining records of purchase cost, and not expecting gains and losses in the same year to offset each other. It also states that the concessional 12.5% capital gains rate does not apply to VDAs and that the Income-tax Act, 2025 continues the same 30% tax, no-set-off and 1% TDS regime from FY 2026-27.
I made INR 1.5 lakh on Bitcoin but lost INR 80,000 on another coin the same year. Surely I only pay tax on my net INR 70,000 profit? And a 1% TDS keeps showing up on my exchange – what is that? – a young investor from Bengaluru
I have to be the bearer of hard news here: crypto is taxed under some of the strictest rules in the entire tax code, and the “just tax my net profit” logic that works everywhere else does not apply. If you deal in Virtual Digital Assets (VDAs) – cryptocurrencies, NFTs and the like – here is exactly how you’ll be taxed for FY 2025-26.
The three rules that make crypto different
The VDA regime (Section 115BBH of the Income-tax Act, 1961) rests on three unforgiving rules:
| Rule | What it means for you |
| Flat 30% tax | Every rupee of gain on a VDA is taxed at 30% (+ 4% cess), whatever your slab – no lower rate, no holding-period benefit |
| No set-off of losses | A loss on one coin CANNOT be set off against a gain on another coin – or against any other income |
| No expenses except cost | You can deduct only what you paid to buy the coin – not fees, interest, or software costs |
Answering the question directly
So, can the Bengaluru investor net his INR 80,000 loss against his INR 1,50,000 gain and pay tax only on INR 70,000? No. Each VDA is taxed on its own gain; losses are simply ignored. Watch what that does to the bill:
| Coin | Result (INR ) | Tax treatment |
| Bitcoin | +1,50,000 | Taxed at 30% = INR 45,000 |
| Other coin | (80,000) | Loss ignored – cannot be set off or carried forward |
| “Net” economic profit | 70,000 | Irrelevant for tax |
| Total tax (+4% cess) | 46,800 | Payable regardless of the loss |
He actually earned INR 70,000 but pays tax as if he earned INR 1,50,000 – an effective rate of about 67% on his real profit. That is the harsh reality of the no-set-off rule, and it’s why crypto tax planning is really about timing and discipline, not clever deductions.
What is that 1% TDS?
Separately from the 30% tax, a 1% TDS is deducted on the sale value of your VDA transactions (Section 194S of the Income-tax Act, 1961). It applies once your transfers cross INR 50,000 in the year (INR 10,000 for some taxpayers). This is not an extra tax – it’s a prepayment. It shows up in your Form 26AS/AIS and you claim credit for it against your final liability, or get it refunded if you’ve overpaid. Its real purpose is to give the tax department a trail of every crypto trade you make, so under-reporting is very risky.
How to stay on the right side of it
A few practical points. Report every VDA transaction in Schedule VDA of your return – the AIS already has the data, so omissions get flagged. Because losses die each year, avoid crystallising a gain and a loss in the same year expecting them to cancel – they won’t. If you’re holding a loss-making coin, selling it gives you no tax benefit whatsoever, so base that decision purely on your view of the asset. And keep clean records of purchase cost for each coin, since that’s the only deduction you get.
One thing worth noting: the VDA rules are deliberately kept separate from the normal capital-gains sections, so the concessional 12.5% rate that applies to shares and property has never applied to crypto, and still doesn’t for FY 2025-26.
A forward look: from FY 2026-27, the Income-tax Act, 2025 replaces the 1961 Act – but it carries this same 30% / no-set-off / 1% TDS regime forward unchanged, so crypto investors see no change.
Bottom line: crypto gains are taxed at a flat 30%, losses cannot be set off against anything, and a 1% TDS tracks every trade. Report everything in Schedule VDA, claim your TDS credit, and never assume your losses will rescue your tax bill – they won’t.
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Disclaimer – This article is for general information based on the law as it stands for FY 2025-26 (AY 2026-27) under the Income-tax Act, 1961. It is not a substitute for advice on your specific facts.
About the Author: Sonia Dawar is a practising Chartered Accountant and the founder of Dawar & Co., where she helps investors, salaried professionals and business owners cut through tax complexity with plain, practical advice. She writes to answer the real questions clients bring to her desk. Have a question of your own? Reach her at sonia@dawarandco.com.
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