For every Rs 100 lost in crypto, you still owe Rs 30 in tax; Why you pay 30% tax even on losses

Lost money in cryptocurrency investment this year? You might still owe tax — even if your portfolio is deep in the red. Under India’s harsh crypto tax laws, traders are liable to pay a flat 30% tax on every rupee of profit, even when their overall portfolio is at a loss. Experts say the current system is among the toughest in the world, leaving Indian crypto investors with little room for relief.

When CA Nitin Kaushik, a chartered accountant and tax specialist, recently explained the reality of crypto taxation on X (formerly Twitter), it struck a nerve among investors. His message was blunt: “Even if you lose Rs 100 in crypto, you could still owe Rs 30 in taxes.”

Here’s why.

Imagine you made Rs 100 profit on Bitcoin but lost Rs 200 on Ethereum during the same financial year. In any other investment, your net result would be a Rs 100 loss. But not in crypto.

Under Section 115BBH of the Income Tax Act, crypto assets—classified legally as Virtual Digital Assets (VDAs)—are subject to unique, rigid rules:

> No set-off of losses (you cannot offset one crypto loss against another profit)

> No carry forward of losses (you can’t adjust it in future years)

> No deductions, except for the cost of acquisition

So, your Rs 200 Ethereum loss is ignored, and you must pay 30% tax on the Rs 100 Bitcoin profit — that’s Rs 30 in tax — resulting in a net Rs 130 loss overall.

Even trading fees, gas charges, mining costs, or exchange commissions cannot be deducted from your taxable gains.

The Tax burden

If your annual crypto transactions exceed Rs 50,000, you also face 1% TDS (Tax Deducted at Source) on every trade, as per Section 194S. This tax is deducted even if you’re not in profit, reducing liquidity and cash flow for active traders.

Since July 2025, the government has also imposed 18% GST on exchange service fees, further increasing the tax load.

The government’s rationale is clear — to discourage speculative trading and treat crypto like gambling winnings, which are taxed at a similar flat rate of 30%. But the impact on genuine investors has been severe.

“Crypto traders are paying tax like gamblers but treated like investors,” said Kaushik. “The policy discourages innovation and pushes liquidity to offshore exchanges.”

Taxation explained

In India, cryptocurrency is classified as a Virtual Digital Asset (VDA) and is taxed under rules introduced in the Union Budget 2022. Gains from the sale, transfer, or exchange of crypto are taxed at a flat 30% rate, plus applicable surcharge and cess, regardless of the holding period or income slab. Additionally, a 1% Tax Deducted at Source (TDS) applies to transactions exceeding Rs 10,000 annually (Rs 50,000 for specified persons). For Indian exchanges, TDS is deducted automatically, while in peer-to-peer or international trades, the buyer must deduct and deposit it.

An 18% GST is also levied on service fees charged by exchanges from July 2025. Losses from VDAs cannot be offset against other income or carried forward, and only the acquisition cost is deductible. Income from airdrops, mining, and staking is taxed at regular slab rates upon receipt, while subsequent profits from selling these assets are taxed at 30%. Gifts from relatives are exempt, but gifts from others exceeding Rs 50,000 are taxable. Simply holding crypto or transferring between personal wallets is not taxed. Non-compliance can lead to interest, fines, or even imprisonment, with unreported VDAs taxed at 60% as undisclosed income. Reporting under Schedule VDA in ITR-2 or ITR-3 is mandatory.

Simply holding crypto or moving it between your own wallets isn’t taxable — but the moment you sell or exchange it, the taxman steps in.

Bottom Line

India’s crypto tax structure is one of the least investor-friendly in the world. The flat 30% tax, 1% TDS, and ban on loss offsets have made crypto trading increasingly challenging for domestic traders.

Experts advise maintaining detailed records, using tax-compliant exchanges, and planning transactions carefully to avoid surprises during tax season.

As the government tightens its grip on the digital asset ecosystem, one thing is clear — in India’s crypto market, even a loss can cost you dearly.