If you are searching whether crypto tax loss set-off in India is allowed, the first step is to identify the tax year. India’s Income-tax Act, 2025 is now in force for tax years beginning under that Act, and its Section 194 contains the special rule for income from transferring a virtual digital asset (VDA). Older periods may require the earlier Act and its Section 115BBH. The section number changes across the two Acts, so copying an old filing guide without checking its year can lead to a misleading answer.
The current rule: start with the applicable tax year
The Income Tax Department’s current text of Section 194 lists VDA transfer income at a 30% rate. Its conditions say that, when computing that income, a loss set-off is not allowed; a loss from a VDA transfer cannot be set against income computed under another provision, and it cannot be carried forward to later tax years. That is the statutory wording to review for a tax year governed by the 2025 Act. The earlier Section 115BBH contains the corresponding legacy provision for periods under the 1961 Act.
This is a narrow explanation of the published text, not an individual tax calculation. Rules, forms and official guidance can be updated, and the treatment of a particular transaction depends on its facts. Check the current Act, relevant rules and return instructions for the period you are filing. If your transaction history includes swaps, transfers between wallets, derivatives, gifts, or a platform that has stopped operating, ask a qualified Indian tax professional to review it. Do not assume that a tax article written before the new Act applies unchanged to a later tax year.
Why a portfolio loss does not settle the tax question
Consider a deliberately simple illustration: one VDA disposal shows a gain of ₹1,00,000 and another shows a loss of ₹80,000 during the same tax year. An investor may look at the combined portfolio result of ₹20,000 and assume that is the only amount relevant to tax. The VDA provision expressly restricts the use of a VDA loss to reduce the computation, so do not assume that net portfolio arithmetic is an allowed set-off. The example does not calculate tax due; it only shows why gain and loss records should not be collapsed into one net number without checking the law.
The same caution applies to a loss compared with salary, equity gains or business income. Section 194 says that a loss from a VDA transfer cannot be set against income computed under another provision and cannot be carried to a later tax year. For older filing periods, verify Section 115BBH and the relevant year’s rules rather than importing the newer section number. A change in statute numbering is not evidence that the economic result or your filing treatment has changed. If return software presents a single net figure, keep the source records that show how it was produced and verify that the calculation follows the applicable rule.
Keep records even when a loss cannot be used
A disallowed tax set-off does not make transaction records optional. Preserve the exchange statement, order and trade IDs, date and time, quantity, asset pair, INR value used, acquisition cost, fees, transaction hash and the wallet addresses you control. For transfers between your own wallets, keep evidence of both ends so a movement is not casually mistaken for a sale. Retain the method used to convert a non-INR quote into rupees and note any missing or corrected exchange entries.
Reconcile platform exports against bank records and on-chain transfers before preparing the return. Keep realised disposals distinct from transfers that did not involve a sale, and flag ambiguous events for review. If one exchange export labels a conversion as a “trade” while another records a deposit and withdrawal, do not let the labels alone determine the tax treatment. Document what happened and use a consistent, reviewable calculation process. Keep a copy of the original export as well as any cleaned spreadsheet so changes can be traced.
Do not confuse TDS with the final tax calculation
Tax deducted at source is a collection and reporting mechanism. It is not the same thing as the final tax computation on VDA income, and a TDS entry does not automatically prove that the gain, acquisition cost or loss has been calculated correctly. The current Act addresses deduction on VDA transfers separately in Section 393. Reconcile a tax statement with the actual trade records, but do not treat a credit or deduction as permission to offset a loss that the applicable VDA rule disallows.
A useful year-end worksheet has one row per disposal, a link to its supporting record, an acquisition-cost field, INR conversion method, any TDS evidence, and a note for unresolved classification questions. Keep versions of the worksheet and the source exports. If numbers change after a correction, write down what changed and why so that the final return can be traced back to the underlying activity. Store transaction data securely and avoid sharing wallet credentials or seed phrases with a tax preparer; transaction records are not account access.
A short filing checklist
- Identify whether the tax year is governed by the 1961 Act or the 2025 Act.
- Read the relevant VDA provision and current return instructions for that period.
- Keep each disposal and its records separate before calculating any total.
- Do not assume a loss can be offset or carried forward; verify the statutory rule.
- Reconcile TDS separately and obtain professional review for complex transactions.
For India crypto users, the practical answer to “can I set off this loss?” begins with the tax year and transaction records, not an exchange dashboard’s profit-and-loss figure. Review the authoritative text before filing and get personalized advice when facts are not straightforward. Crypto assets are volatile, exchange access and liquidity can change, and tax treatment is not investment advice. See our related guide to reconciling an Indian crypto exchange TDS statement and the crypto exchange and market-structure hub.
