Can You Set Off Crypto Losses Against Salary or Stocks? Section 115BBH Rules
Zero. VDA losses cannot be set off against salary, stock gains, or business income, and cannot be carried forward under s.115BBH ITA 1961 — the harshest loss restriction in the Act. Only set-off against VDA gains in the same year is possible, and even that is contested.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Zero — you cannot set off a virtual digital asset (VDA) loss against salary, capital gains on shares, rental, or business income, and you cannot carry a VDA loss forward to any future year under s.115BBH of the Income-tax Act, 1961. The only set-off available is VDA loss against VDA gain in the same year — and even that single exception is contested in current assessments. This is the most restrictive loss regime in the entire Act: no other asset class is both quarantined from other income and barred from carry-forward at the same time.
How VDA loss rules compare with every other loss in the Act
The VDA column is the outlier. Equity losses carry forward eight years and set off against future gains; business losses carry forward four to eight years; even speculative losses get four. A VDA loss is extinguished in the assessment year it arises — unless you happen to have a VDA gain in the same year to absorb it.
The two statutory bars
Section 115BBH(2) creates the quarantine:
- s.115BBH(2)(b) — "the loss, if any, from the transfer of a virtual digital asset, if it is a loss computed under clause (a), shall not be set off against the income computed under any other provision of this Act." Salary, stocks, rent, business — none can absorb a VDA loss.
- No carry-forward under s.74. Section 74 (capital loss carry-forward) applies to capital gains, not to the special VDA regime. There is no separate carry-forward provision for VDA losses, so a loss that cannot be set off in-year is simply gone.
The wording "against the income computed under any other provision" is what makes the intra-VDA netting question genuinely open — see below.
The contested point: can a BTC loss net an ETH gain?
VERIFY WITH CA before filing. Whether a loss on one VDA can be set off against a gain on another VDA in the same year is not settled:
- Argument for netting: s.115BBH(2)(b) bars set-off against income "under any other provision." A loss and a gain both computed under s.115BBH are arguably within the same provision, so netting is permitted. The Schedule VDA in the ITR and most tax software compute a net VDA figure for the year.
- Argument against: some Assessing Officers read the bar literally and reject even intra-VDA netting, treating each transfer as its own chargeable event.
The position is being tested in AY 2022-23 and AY 2023-24 assessments. Until a court settles it, do not file a net figure without your CA confirming the current department position. The difference is material: ₹4 lakh of BTC loss can erase ₹4 lakh of ETH gain — a ₹1,24,800 swing at 31.2% — or it cannot.
Worked example: Meera, BTC loss, ETH gain, equity LTCG
Persona: Meera, salaried employee, FY 2025-26 (AY 2026-27). Three events in the year:
- Sells Bitcoin (BTC) — loss ₹4,00,000
- Sells Ethereum (ETH) — gain ₹1,50,000
- Sells listed equity — long-term gain ₹2,00,000 (taxable 12.5% u/s 112A)
- Salary ₹20,00,000 (new regime)
Step 1 — What the loss CANNOT do.
- ❌ Cannot set off against salary income (₹20L taxed at slab).
- ❌ Cannot set off against the ₹2,00,000 equity LTCG (different provision — s.112A).
- ❌ Cannot carry forward to AY 2027-28.
Step 2 — What it CAN do (contested). Net BTC loss against ETH gain within the VDA block: ₹4,00,000 − ₹1,50,000 = ₹2,50,000 net VDA loss. Under the netting interpretation, VDA tax = ₹0, and the remaining ₹2,50,000 loss is extinguished. Under the no-netting interpretation, the ETH gain of ₹1,50,000 is taxed at ₹46,800 (31.2%) and the ₹4,00,000 loss is entirely extinguished.
Step 3 — The equity gain is unaffected either way.
- Equity LTCG ₹2,00,000 × 12.5% = ₹25,000 (no indexation; s.112A) — this tax is payable regardless of the crypto position.
The two interpretations produce a ₹46,800 difference in Meera's VDA tax. That single line is why the intra-VDA netting question decides whether her year's return is correct.
What this means for your strategy
- Don't "harvest" VDA losses to offset other income — the Act forbids it. A loss-maker who also has stock gains gets no cross-set-off.
- Realise VDA losses in a year you have VDA gains, if the netting position holds — that is the only year a loss has value.
- Don't carry a losing position into a fresh year hoping the loss survives — it cannot. Each year's VDA block stands alone.
- Keep per-transaction records even on loss trades — the department's SFT data shows gross sale consideration, and your declared loss must reconcile.
Changed FY 2025-26: No change in the statute — s.115BBH(2) has read the same since AY 2023-24. What changed is enforcement reality: exchange SFT/AIS data now flows to most filers, so under-declared VDA gains and inflated loss claims are the specific items the reconciliation engine flags. A loss claimed on Schedule VDA that cannot be explained against the exchange data is a 143(1) adjustment waiting to happen.
Frequently asked questions
1. Can I set off a crypto loss against my salary?
No. s.115BBH(2)(b) prohibits set-off of VDA losses against income computed under any other provision of the Act, and salary is computed under a different provision.2. Can I set off a crypto loss against stock gains?
No. Equity long-term gains are charged under s.112A; a VDA loss cannot reduce them. They are different provisions, and the bar in s.115BBH(2)(b) applies.3. Can I set off one crypto loss against another crypto gain?
Possibly — verify. Intra-VDA netting in the same year is contested between practitioners and some Assessing Officers. It is not safe to assume until the department position is confirmed for your case.4. Can I carry a crypto loss forward to next year?
No. There is no carry-forward provision for VDA losses; s.74 does not apply. The loss is extinguished in the year it arises.5. How is a VDA loss different from an F&O loss?
F&O losses set off against other income (but not against salary since AY 2025-26 — s.71 proviso, FA(No.2) 2024) and carry forward eight years. VDA losses do neither. F&O is non-speculative business income; VDA is a quarantined special rate.6. What if my loss is bigger than all my gains in a year?
The excess is lost. Any VDA loss not absorbed by VDA gain in the same year is extinguished permanently. Plan disposals accordingly.7. Where do I report the loss?
Schedule VDA in ITR-2/ITR-3, transaction-by-transaction, with the loss figure flagged only if your CA confirms intra-VDA netting is being accepted for your assessment year.---
Last verified: 2026-08-08 (FY 2025-26 / AY 2026-27)
Sources: s.115BBH(2)(a)–(b), Income-tax Act, 1961; s.74 (capital-loss carry-forward — not applicable to VDA); s.71, s.71(3A) (set-off framework); s.112A (equity LTCG); s.115BBE (analogous special-rate quarantine). The intra-VDA netting position is contested and flagged for CA verification per the task brief. For a VDA computation before filing, use the Crypto VDA Tax Calculator or book a consultation at harunraaj.com.
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