Tax on Crypto and VDA Losses: What Cannot Be Set Off
Reviewed by CA Nikhil Gupta · Last reviewed 19 June 2026
Crypto and VDA taxation is intentionally ring-fenced. The most expensive mistake is assuming that a loss on one VDA trade can be adjusted against salary, business income, capital gains or even another kind of income in the normal way.
For broader context, see the Income-tax Act, 2025 — Full Chapter-by-Chapter Study Guide Hub.
Section 115BBH in plain English
Official Section 115BBH material deals with tax on income from transfer of virtual digital assets. It also restricts deductions other than cost of acquisition and restricts set-off of loss from transfer of VDA against income under any other provision.
Use the ITR Form Selector — AY 2026–27 to work through the related inputs before acting.
What cannot be set off
| Loss / cost item | Risk control |
|---|---|
| Loss from transfer of VDA | Do not set off against salary, house property, business income or normal capital gains. |
| Mining/staking/platform expenses | Do not deduct unless specifically permitted; official rule focuses on cost of acquisition only. |
| Exchange fees and funding costs | Check whether they form part of acquisition facts; do not take aggressive deductions without support. |
| Loss carry-forward | VDA loss set-off/carry-forward is restricted; preserve exchange reports for disclosure. |
For the connected rule, example or next step, see Crypto / VDA Tax Reporting: What Investors Should Not Ignore.
Documents to preserve
- Exchange-wise trade report with date/time, quantity and INR value.
- Wallet transfer and exchange deposit/withdrawal trail.
- Cost acquisition working for each VDA transaction.
- Form 26AS/AIS/TDS under VDA-related provisions, where applicable.
- Computation note explaining why loss was not set off.
For the connected rule, example or next step, see Crypto Held on a Foreign Exchange: VDA Tax, Schedule FA and Which ITR?.
Finin2min warning
Official sources used
This article is intentionally source-limited to official Income Tax Department / e-Filing material. Verify final filing positions with the latest Act, Rules, circulars and portal utilities before publishing.
- Income Tax Department: Taxation of Virtual Digital Asset (VDA)
- Income Tax Department: Section 115BBH — Tax on income from virtual digital assets
- Income Tax Department: Income-tax Act, 2025 as amended by Finance Act, 2026
- Income Tax Department: Treatment of income from different sources
- Income Tax Department: Tax Deduction at Source overview
FAQs
No. Section 115BBH restricts set-off of loss from transfer of VDA against income under any other provision.
The official Section 115BBH rule restricts deductions other than cost of acquisition.
Yes. Keep transaction-level reports because AIS/TDS and exchange dashboards may not by themselves explain the full computation.
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in
Page source links
- Income Tax Department: Taxation of Virtual Digital Asset (VDA)
- Income Tax Department: Income-tax Act, 2025 as amended by Finance Act, 2026
- Income Tax Department: Section 115BBH — Tax on income from virtual digital assets
- Income Tax Department: Tax Deduction at Source overview
- Income-tax Act, 2025 and Income-tax Rules, 2026 official hub
- Finin2min Editorial Policy
- FIU-IND — VDA Service Provider AML/CFT/CPF Guidelines
- Income Tax Department — Tax Payments FAQ