When a viral post by chartered accountant Nitin Kaushik spread across Indian social media in October, it set off panic among crypto investors. The message: even if you lose money trading cryptocurrency, you may still owe a 30 percent tax.
The post drew attention to Section 115BBH of India’s Income Tax Act, which imposes a flat 30 percent levy on gains from “virtual digital assets” (VDAs) — but bars offsetting losses, deductions, or carryforwards.
Rigid Rules, Real Consequences
Under the current framework, an investor who gains ₹50,000 on Bitcoin but loses ₹20,000 on Ethereum must still pay tax on the full ₹50,000. Transaction costs and trading fees can’t be deducted.
A 1 percent TDS also applies to all crypto transfers above prescribed limits, deducted on the total amount — even when traders end the year in the red. The outcome: users lose liquidity while tax authorities collect early.
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Investor Frustration and Policy Logic
Officials defend the design as a way to deter speculative activity and ensure traceability of crypto trades. But market participants say it unfairly penalizes legitimate investors and startups.
Since the tax’s introduction in 2022, trading volumes on Indian exchanges have dropped sharply. Several platforms have relocated overseas, citing the rigidity of India’s crypto taxation regime and lack of clarity around loss treatment.
Calls for Reform
Tax professionals and industry advocates are urging the government to allow setoffs for losses within the same asset class or reconsider the blanket 30 percent rate.
For now, the policy remains unchanged — a stark reminder that in India’s evolving financial landscape, the gap between innovation and regulation remains as wide as ever.
