What Happens to Crypto TDS When You Have Both Profits and Losses? (2026)

If you trade cryptocurrency in India and have both profitable and loss-making transactions, one important thing to understand is that TDS and crypto profit/loss are calculated differently.

A loss on one crypto transaction does not automatically cancel the TDS deducted on another transaction. At the same time, TDS is not your final crypto tax. It is generally treated as a tax credit against your overall tax liability.

Under the current framework, income from VDA transfers is taxed at 30% under Section 115BBH, plus applicable surcharge and 4% health and education cess. The Income Tax Department also requires VDA transactions to be reported transaction-wise in Schedule VDA.

Quick Example

Suppose you make three crypto transactions:

Transaction	Cost	Sale Value	Result	TDS
Bitcoin	₹1,00,000	₹1,50,000	₹50,000 Profit	₹1,500
Ethereum	₹1,00,000	₹70,000	₹30,000 Loss	₹700
Solana	₹1,00,000	₹1,20,000	₹20,000 Profit	₹1,200

Total TDS:

₹1,500 + ₹700 + ₹1,200 = ₹3,400

The important point is that you don’t simply subtract the ₹30,000 loss from the two profits and then calculate everything as though the loss offsets them.

Under Schedule VDA, the Income Tax Department specifically instructs taxpayers to enter nil income where an individual VDA transaction results in a loss.

Is Crypto TDS Refunded Because You Made a Loss?

Not automatically.

TDS is deducted independently when the applicable TDS provisions are triggered.

For example:

Crypto purchase/acquisition cost: ₹1,00,000

Transfer value: ₹70,000

You have a:

₹30,000 loss

But if the transaction is subject to applicable 1% TDS:

₹70,000 × 1% = ₹700 TDS

The fact that the transaction produced a loss does not by itself mean that the ₹700 TDS was never deducted.

The TDS can subsequently be considered as a tax credit, subject to your overall tax computation.

Why TDS and Crypto Loss Are Different

Think of them as two separate calculations.

Calculation 1: Transaction Result

Consideration received − Cost of acquisition

Example:

₹70,000 − ₹1,00,000

= ₹30,000 loss

Calculation 2: TDS

If 1% applies:

₹70,000 × 1%

= ₹700 TDS

The loss doesn’t change the mathematical TDS calculation.

Does a Crypto Loss Cancel TDS?

Generally, no.

Suppose:

• Trade A profit = ₹50,000
• Trade B loss = ₹30,000
• TDS on Trade A = ₹1,500
• TDS on Trade B = ₹700

You cannot simply say:

“I made a ₹30,000 loss, so the ₹700 TDS on that transaction disappears.”

TDS that has actually been deducted remains a tax credit subject to being correctly reported and reflected in your tax records.

How Crypto Losses Are Reported

The current Schedule VDA requires details of every VDA transfer.

It includes:

• Date of acquisition
• Date of transfer
• Head under which income is taxed
• Cost of acquisition
• Consideration received
• Income from transfer

Importantly, the form says to enter nil in case of loss in the income-from-transfer column.

So a loss-making transaction is not simply entered as a negative VDA income figure in that column.

Example: One Profit and One Loss

Suppose you have:

Bitcoin

Purchase:

₹2,00,000

Sale:

₹3,00,000

Profit:

₹1,00,000

TDS:

₹3,000

Ethereum

Purchase:

₹2,00,000

Sale:

₹1,50,000

Loss:

₹50,000

TDS:

₹1,500

Your total TDS is:

₹4,500

But for Schedule VDA, the loss transaction is not simply used as a ₹50,000 negative figure to reduce the positive VDA income. The current form specifically says to enter nil income in case of loss.

What Happens to the ₹4,500 TDS?

The ₹4,500 is not automatically lost.

It is potentially available as TDS credit, provided it has been correctly deducted and reported.

Your final tax computation then determines whether:

• You have additional tax to pay, or
• Your available tax credits exceed your final liability and a refund becomes due.

This is why TDS should be reconciled with your tax records rather than treated as an additional 1% tax.

Example With Final Tax Calculation

Suppose your qualifying profitable VDA transactions produce:

₹1,00,000 taxable VDA income

Basic tax at 30%:

₹30,000

4% cess:

₹1,200

Tax before applicable surcharge:

₹31,200

Suppose your total eligible TDS credit is:

₹4,500

Then, in this simplified example:

₹31,200 − ₹4,500 = ₹26,700

So approximately ₹26,700 remains payable before considering any other applicable tax credits, surcharge or adjustments.

What If You Have More TDS Than Your Tax Liability?

Suppose:

Final tax liability = ₹10,000

TDS credit:

₹15,000

The ₹15,000 is not simply treated as a new crypto tax.

After considering the complete return and other tax adjustments, the excess may result in a tax refund.

So TDS can sometimes be higher than the final tax you ultimately have to pay.

Can You Use a Crypto Loss to Reduce Other Income?

This is where crypto taxation becomes particularly important.

The special VDA regime does not work like ordinary capital-loss rules.

The current Schedule VDA specifically instructs taxpayers to report nil income for a loss-making transaction, and the VDA framework has restrictions on using VDA losses.

Therefore, you should not assume that:

Crypto loss → reduce salary income

or:

Crypto loss → reduce other investment gains

without checking the specific VDA provisions.

Profit + Loss + TDS: A Simple Table

Consider this example:

Trade	Cost	Transfer Value	Result	TDS @ 1%*
BTC	₹1,00,000	₹1,50,000	₹50,000 Profit	₹1,500
ETH	₹1,00,000	₹70,000	₹30,000 Loss	₹700
SOL	₹2,00,000	₹2,50,000	₹50,000 Profit	₹2,500
Total	₹4,00,000	₹4,70,000	Profit/loss requires VDA rules	₹4,700

*Illustrative only. Actual TDS applicability depends on the transaction, taxpayer category and applicable threshold/rules.

The key point is:

TDS = transaction-level withholding

while

VDA income = determined under the separate VDA tax provisions.

What If All Your Trades Are Loss-Making?

Suppose:

Trade	Cost	Sale	Result	Illustrative TDS
BTC	₹2,00,000	₹1,50,000	Loss	₹1,500
ETH	₹1,00,000	₹80,000	Loss	₹800
SOL	₹50,000	₹40,000	Loss	₹400

Total losses:

₹80,000

Illustrative TDS:

₹2,700

You shouldn’t assume that because your transactions were loss-making, the TDS automatically becomes zero.

If TDS was applicable and actually deducted, maintain the TDS records and claim the available credit through the tax-return process.

What If You Have Huge Losses but Small Profits?

This situation can be confusing.

Suppose:

Profit transaction = ₹1,00,000

Loss transaction = ₹5,00,000

A normal investment calculation might tempt you to say:

Net result = ₹4,00,000 loss

But VDA taxation has specific restrictions on loss treatment.

The current ITR framework therefore does not simply treat every VDA loss as a negative number in Schedule VDA. The official form instructs taxpayers to enter nil income where the individual transaction results in a loss.

This is one of the biggest differences between crypto and many traditional investment tax calculations.

What Happens to TDS on a Loss-Making Transaction?

There are three separate questions:

1. Was TDS applicable?

This depends on the transaction and relevant threshold/rules.

2. Was TDS actually deducted?

Check your exchange statement and tax records.

3. Can you claim the TDS credit?

Generally, eligible TDS can be claimed as tax credit in your return, subject to it being correctly reported and available in the tax records.

The loss itself does not automatically erase the TDS.

What About Crypto-to-Crypto Transactions?

Suppose:

Bitcoin → Ethereum

You don’t receive INR, but it can still constitute a VDA transfer for tax/reporting purposes.

The current Form 141 framework specifically recognizes VDA transactions conducted in cash or in exchange for another VDA.

So traders should not ignore TDS or tax records simply because no rupees were deposited into their bank account.

What If Your Exchange Has Already Deducted TDS?

If your exchange deducts TDS automatically, save:

• Transaction statement
• TDS statement
• Trade history
• Order history
• Deposit/withdrawal records
• Tax information available through the exchange
• AIS/TDS information

Then reconcile the figures before filing your return.

For certain Individual/HUF VDA transactions, the current framework uses Form 141, Schedule D, under Section 393(1).

Don’t Confuse TDS With 30% Crypto Tax

Suppose:

VDA taxable income = ₹2,00,000

Tax:

₹2,00,000 × 30% = ₹60,000

Cess:

₹2,400

Total before applicable surcharge:

₹62,400

Suppose TDS:

₹5,000

You don’t calculate:

₹62,400 + ₹5,000 = ₹67,400

Instead, the ₹5,000 can generally be considered as TDS credit.

Simplified:

₹62,400 − ₹5,000 = ₹57,400

Does a Loss Reduce the 1% TDS Rate?

No, not simply because it is a loss.

TDS is a withholding mechanism.

If the relevant transaction is covered and the applicable TDS conditions are met, the fact that you purchased the asset for more than you sold it for doesn’t automatically turn the TDS rate into zero.

Important Difference: Loss vs TDS Refund

These are two different concepts.

Crypto Loss

Determined from the VDA transaction under the applicable tax rules.

TDS Refund

Potentially arises when your total eligible tax credits exceed your final tax liability.

Therefore:

A crypto loss does not automatically create a TDS refund.

A refund depends on your overall tax calculation and available tax credits.

How to Handle 100+ Crypto Transactions

If you actively trade, don’t calculate tax from your bank statement alone.

Create a transaction sheet containing:

Date	Asset	Acquisition Cost	Transfer Value	Profit/Loss	TDS	Exchange
10 Apr	BTC	₹1L	₹1.4L	₹40K	₹1.4K*	Exchange
15 Apr	ETH	₹1L	₹80K	Loss	₹800*	Exchange
25 Apr	BTC	₹1.5L	₹1.9L	₹40K	₹1.9K*	Exchange

*Illustrative only; don’t assume 1% applies to every transaction.

The current Schedule VDA requires transaction-wise reporting, making detailed records especially important for active traders.

Common Mistakes

1. “I made a loss, so my TDS should be zero.”

Not necessarily.

2. “My loss can automatically cancel my crypto profit.”

Don’t assume this under the VDA regime.

3. “TDS is my final crypto tax.”

It isn’t.

4. “TDS should be calculated on my profit.”

The applicable TDS mechanism is based on the relevant transaction/consideration, not simply your economic profit.

5. “Crypto-to-crypto swaps don’t matter.”

They can matter for both tax and reporting.

6. “I can calculate everything from my bank statement.”

Not if you have active trading, transfers between wallets, crypto-to-crypto swaps or multiple exchanges.

Final Verdict

When you have both crypto profits and losses, keep these three things separate:

1. Profit/Loss

Calculated transaction-wise using the applicable VDA rules.

2. TDS

Deducted where the applicable TDS provisions are triggered. The current framework uses Section 393(1) and Form 141 for relevant VDA TDS transactions by Individual/HUFs.

3. Final Tax Liability

Your applicable VDA tax is calculated separately. The Income Tax Department currently states that VDA gains are taxed at 30% under Section 115BBH, plus applicable surcharge and 4% cess.

The simplest way to remember it is:

Crypto loss does not automatically cancel TDS. TDS does not become your final tax. And a VDA loss should not automatically be used to offset other VDA income without applying the specific VDA loss rules.

For a trader with multiple exchanges, hundreds of transactions, P2P trades, crypto-to-crypto swaps or substantial TDS, transaction-level reconciliation is strongly advisable before filing the income-tax return.