The point
A ₹1 lakh loss on one coin saves you nothing against a ₹3 lakh gain on another. Section 115BBH taxes each crypto gain at 30 percent and allows no set-off. The same ₹1 lakh loss on a listed share, held for more than 12 months, cuts the tax on a long-term gain by ₹12,500. That difference in how losses are treated decides what a held position costs you after tax, more than the headline rate does.
What does section 115BBH say about crypto losses?
Section 115BBH of the Income Tax Act taxes income from the transfer of a virtual digital asset at a flat 30 percent, plus cess. The only deduction it allows is what you paid to acquire the asset. Platform fees and other expenses are not deductible (KoinX glossary on section 115BBH, read 25 October 2026).
Then comes the rule on losses. A loss on one virtual digital asset cannot be set off against a gain on another, and it cannot be carried forward to a later year. Each winning sale is taxed in full, and each losing sale is stranded.
Section 194S adds a 1 percent TDS on the transfer. TDS is tax deducted at the time of the sale and counted against your final bill. It is a collection step and does not change the 30 percent rate or the loss rule.
How are losses treated on listed shares?
A listed share held for more than 12 months produces a long-term capital gain under section 112A. The rate is 12.5 percent, and the first ₹1.25 lakh of long-term gains in a year is exempt (ClearTax on section 112A, read 25 October 2026).
Losses work the other way round. A long-term loss can be set off against a long-term gain. A loss not used up in the year can be carried forward for up to eight assessment years. It can then be set against long-term gains later (ClearTax on section 112A, read 25 October 2026). Short-term losses are more flexible still, because they can be set off against both short-term and long-term gains.
So the equity rules give a losing position some value, and the crypto rules give it none.
What does one year of two trades cost under each rule?
Take the same two sales in one year. One position closes with a gain of ₹3,00,000. Another closes with a loss of ₹1,00,000. The figures below are an illustration of the arithmetic, before cess and surcharge, not a forecast of any result.
Two listed shares, both held over 12 months
The long-term gain is ₹3,00,000 and the long-term loss is ₹1,00,000, so the net gain is ₹2,00,000 (₹3,00,000 minus ₹1,00,000).
Subtract the ₹1,25,000 exemption and ₹75,000 is taxable. Tax at 12.5 percent is ₹9,375 (₹75,000 × 12.5%).
Without the loss, the taxable amount would be ₹1,75,000 (₹3,00,000 minus ₹1,25,000), and the tax would be ₹21,875. The loss saved ₹12,500, which is 12.5 percent of ₹1,00,000.
Two coins held directly
The gain of ₹3,00,000 is taxed at 30 percent, which is ₹90,000 (₹3,00,000 × 30%). The loss of ₹1,00,000 offsets nothing, so the tax stays at ₹90,000.
You made ₹2,00,000 across the two coins and paid ₹90,000 of it in tax. That is 45 percent of what you actually made (₹90,000 ÷ ₹2,00,000).
The same two positions inside a basket
With a Qatobit index you hold the basket, not the coins, and the sale of the basket is your taxable event. Inside a basket, a loss on one token offsets a gain on another, because the sale is of the basket rather than of each coin.
If the same two positions sat inside one basket and you sold it, the net gain would be ₹2,00,000. Tax at 30 percent is ₹60,000 (₹2,00,000 × 30%), which is ₹30,000 less than the direct holder pays. The difference is exactly 30 percent of the ₹1 lakh loss.
A monthly rebalance inside an index is not your taxable event. The rebalance moves nothing out of your own holding, so your transfer is your own sale or redemption of the basket.
Sources: KoinX glossary on section 115BBH and ClearTax on section 112A, both read 25 October 2026.
Why does the loss rule matter more than the rate?
A rate is visible. A stranded loss is not, because it never appears as a line anywhere. You see the 30 percent, and you do not see the ₹30,000 you could have kept.
I hold that this is the real cost of buying coins one by one. Every position you close is its own tax event, and the winners cannot be netted against the losers. The more separate sales a year contains, the more losses end up with no use.
It also changes what counts as a loss worth noticing. A coin sold at a ₹1 lakh loss feels like a cost already paid. Under section 115BBH it is a cost with no tax value attached. You cannot sell it to harvest a tax benefit the way an equity investor can.
Is anyone else changing how a swap is taxed?
France is. A budget amendment adopted by 38 votes to 37 would make a swap from crypto into a euro-pegged stablecoin a taxable sale from 1 January 2027. It would also give each coin its own purchase price (Decrypt, read 25 October 2026).
The amendment has not become law and still faces the rest of the budget process. It is here because tax rules on crypto keep moving, and the rule on losses is the part that decides what a held position costs.
What should you do with this?
Before your next sale, write down the gain or loss on each position separately and apply the rule to each one. A position closed at a loss does not shrink your bill, so the gains alone set it.
Then count the separate sales in your year. Each one is a taxable event, and each loss among them is stranded. Fewer, deliberate exits strand fewer losses than frequent switching does.
Two earlier pieces cover the rest of the picture. How much tax on crypto gains in India walks through the 30 percent step by step. Crypto index rebalance tax in India explains the rebalance question in more detail. If you want to hold a spread of crypto as a single position, invest in QSI Growth, which holds Bitcoin, Ethereum, Solana, Gold and a stable reserve and rebalances monthly. The methodology pages carry the full rules.
Sources: Decrypt on the French stablecoin amendment, read 25 October 2026.
Frequently asked questions
Can I set off a crypto loss against a crypto gain in India?
No. Under section 115BBH, a loss on one virtual digital asset cannot be set off against a gain on another, and it cannot be carried forward. Each gain is taxed at 30 percent with only the cost of acquisition deducted.
Can a crypto loss be set off against a share gain?
No. A crypto loss cannot be set off against any other income, including capital gains on listed shares. A long-term share loss can only be set off against long-term share gains.
What is the tax rate on long-term gains from listed shares?
Long-term gains on listed shares held for more than 12 months are taxed at 12.5 percent under section 112A. The first ₹1.25 lakh of such gains in a year is exempt. Losses can be set off against long-term gains and carried forward for up to eight assessment years.
How much TDS applies to a crypto sale?
Section 194S requires 1 percent TDS on the transfer of a virtual digital asset. It is a collection step counted against your tax and does not change the 30 percent rate or the no set-off rule.
Is a monthly rebalance inside a Qatobit index a taxable event?
No. A monthly rebalance inside an index is not your taxable event, because you hold the basket and not the coins. The sale of the basket is the taxable event, and a loss on one token inside it offsets a gain on another.
Crypto investments are subject to market risk. Not financial advice.
“A better allocation begins with a better explanation.”
Qatobit principle
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