No Loss Offset Rule India: What It Means for Crypto and Stock Traders

When you lose money on crypto or stocks in India, you might assume you can use that loss to lower your tax bill. But under the no loss offset rule India, a tax regulation that prevents traders from using investment losses to reduce taxable income from other sources. Also known as loss carryforward restrictions, this rule means losses from digital assets or equities can’t be used to offset gains from salary, business income, or even other investments. It’s not about whether you made money overall—it’s about what the tax department allows you to claim.

This rule hits crypto traders especially hard. Unlike stocks, where you can carry forward capital losses for up to eight years to offset future gains, crypto losses in India are treated differently. The government doesn’t classify crypto as a capital asset for loss offset purposes. So if you bought Bitcoin at $40,000 and sold it at $25,000, that $15,000 loss doesn’t reduce your tax on your salary or your gains from selling Ethereum. It just disappears. Meanwhile, if you made a profit on a meme coin like PUMP or BURNS, you pay 30% tax on that gain—with no way to balance it out. The same applies to tokens like SLEX or ETPOS. If you lost money on those, too bad. The tax system ignores it.

Some traders try to get creative—swapping assets between exchanges, using foreign platforms, or even trying to claim losses through NFTs. But the Indian tax authorities are catching on. They’re tracking on-chain activity, cross-referencing wallet addresses, and demanding proof of transactions. Even if you use a VPN or trade on Bitso or Thalex, the income or loss still gets flagged if it’s tied to an Indian resident. The capital gains tax India, a flat 30% rate on crypto profits with no indexation benefit. Also known as crypto income tax, it’s one of the highest in the world and leaves no room for loss adjustments. Meanwhile, traditional stock investors can still use long-term capital losses to offset future stock gains—but not crypto losses. That’s a major gap.

What’s worse? There’s no official guidance on how to report crypto losses at all. The IT department doesn’t have a form for it. You can’t file a return showing a net loss from crypto. That means your losses are invisible to the system—and you’re still taxed on every single profit. This creates a situation where traders are paying tax on gains while their losses vanish into thin air. It’s not just unfair—it’s confusing. And with platforms like Market Exchange or BitAsset being flagged as risky, the last thing you need is to get audited because you tried to claim something the rules don’t allow.

So what can you do? Track everything. Keep records of every trade, even the ones that lost money. If the rules ever change—and they might—you’ll have proof. And if you’re using DeFi tools like liquid staking or DEXs like Uniswap, remember: every swap, every reward, every withdrawal could trigger a taxable event. The no loss offset rule doesn’t care if you’re a beginner or a pro. It doesn’t care if you’re trading for fun or for survival. It just says: profit? Pay tax. Loss? Too bad.

Below, you’ll find real cases from Indian traders who got burned by this rule—whether they lost money on a token that vanished, tried to dodge taxes with a VPN, or got hit with a tax notice after a single profitable trade. These aren’t hypotheticals. These are the stories of people who thought the system would work for them. It didn’t. But now you know.