Drishti Pro दृष्टि Learn ↗

Home › Learn › Why Your Losses Do Not Count | Drishti Varsity

Why Your Losses Do Not Count

Published by the Drishti team · Reviewed 2026-08-24 · Researched and edited with AI assistance.

If my crypto gains and losses cancel out this year, do I still owe tax in India?

A ₹40,000 Bitcoin profit and a ₹40,000 Ether loss look like a wash, but India taxes each coin in its own sealed box, so you owe 31.2% on the ₹40,000 gain, or ₹12,480. That loss brings no relief and cannot touch salary, stocks, or next year's return, under Section 194 as of August 2026.

Module 1 · Chapter 6 of 10 · ~4 min read · Tax and law facts as of August 2026

In the last chapter, you learned the flat 30% tax on one profitable trade. This chapter covers what happens once a loss enters the picture.

Two Boxes, One Tax Bill

Say you sell Bitcoin (BTC) for a ₹40,000 profit in March. In June, you sell Ether (ETH) at a ₹40,000 loss.

Your gut says the two cancel out to ₹0 for the year. Indian tax law disagrees with that gut feeling.

Every Virtual Digital Asset (VDA), the tax term for crypto, sits in its own sealed box. Your BTC box and your ETH box never talk to each other.

This rule sat in Section 115BBH of the old 1961 Act. It is now Section 194 of the Income-tax Act, 2025, in force since 1 April 2026.

The tax office sees only your ₹40,000 BTC profit. It taxes that profit at a flat 30%, plus a 4% cess on top.

As of August 2026, this is the most misunderstood rule in Indian crypto tax. Budget 2026 left it exactly as it was.

Most first-time traders expect a break-even year to mean zero tax. The bank balance says otherwise before the reason becomes clear.

Two crypto trades in one year: a ₹40,000 Bitcoin profit and a ₹40,000 Ether loss cannot be set off against each other, so ₹12,480 in tax is charged on the profit alone even though the net result is zero.BTC+₹40,000set-off not allowedETH−₹40,000Net result₹0Tax office counts the BTC gain onlyTax payable₹12,48031.2% of ₹40,000
BTC profit and ETH loss cannot be set off — tax hits the profit alone even though the net result is zero.

Crypto Losses vs Stock Losses

Stock losses actually help you. A ₹40,000 short-term loss on one stock can cancel a ₹40,000 short-term gain on another.

That pair then owes no tax at all. A long-term loss can only offset a long-term gain, but the relief is real.

A VDA loss gets none of this relief. It cannot offset a VDA gain, salary, business income, house property, or capital gains from shares.

Stock losses flow into and shrink a taxable gain, but an identical crypto loss hits a wall and cannot reduce the crypto gain at all — same shapes, one rule differs.StocksCryptoGainGainLossLossloss reduces the gainloss is blockedSame shapes. One rule differs.
Same shapes, one rule differs: a stock loss flows into and shrinks a gain; a crypto loss hits a wall.

Only the Winning Trades Get Taxed

Say you make four trades in a year. Two win ₹20,000 and ₹15,000; two lose ₹10,000 and ₹5,000.

Your real result is a ₹20,000 profit, and the tax office ignores that number completely.

It checks each trade for a profit, one at a time. The two winners add up to ₹35,000, and that figure gets taxed at 31.2%.

Your two losing trades vanish from the sum, however large they were.

Four trades, but tax counts only the two winners Trade 1 +₹20,000 Trade 2 +₹15,000 Trade 3 −₹10,000 Trade 4 −₹5,000 Real result (all four trades) ₹20,000 Taxed amount ₹35,000 sum of winners only, taxed at 31.2% Tax counts only the winners.
Four trades stack: two winners (+₹20,000, +₹15,000) count toward tax; two losers (−₹10,000, −₹5,000) drop out. Real net result is ₹20,000, but ₹35,000 gets taxed at 31.2%.

The Churn Trap

This rule punishes frequent trading hard. Every winning trade closed creates a fresh taxable event.

Every losing trade closed just disappears from the count. The more trades you make, the more winners you hand over for taxing.

Picture three traders with the same ₹30,000 real profit and the same market view. One makes 5 trades, one makes 20, and one makes 50.

Each one splits the same move into more entries and exits. The numbers below are illustrative, and they ignore fees and the 1% TDS.

A comparison of 5, 20 and 50 crypto trades in a year: gross profit and gross loss rise together, but only the profit is taxed, so the money actually kept after tax turns more negative as trading frequency increases.5 tradesGross profit (winners)₹40,000Gross loss (losers)₹40,000Taxable amount₹40,000Tax paid (31.2%)₹12,480Money actually kept−₹12,48020 tradesGross profit (winners)₹1,60,000Gross loss (losers)₹1,60,000Taxable amount₹1,60,000Tax paid (31.2%)₹49,920Money actually kept−₹49,92050 tradesGross profit (winners)₹4,00,000Gross loss (losers)₹4,00,000Taxable amount₹4,00,000Tax paid (31.2%)₹1,24,800Money actually kept−₹1,24,800Take-home keeps falling as trades rise.
More trades mean more gross profit and gross loss, but only the profit is taxed — take-home keeps falling.

Same real profit, same skill, yet the outcomes differ sharply. The 50-trade trader keeps under a third of what the 5-trade trader keeps.

Each extra flip adds one more taxed win, without cancelling the loss sitting beside it. More trades do not mean more safety in India's crypto tax system.

Fewer high-conviction trades beat frequent in-and-out trading, even at the same win rate.

A 1% tax is also deducted before sale money reaches you. The next chapter explains how that TDS works.

Key takeaways

See Drishti Pro's live signals All lessons

Educational & illustrative only — not investment advice. Drishti Pro publishes AI-generated trade ideas and their public track record for information. Crypto is volatile and you can lose money. Nothing here is a recommendation to buy or sell any asset. Do your own research.