Definition
Phantom Gains (Crypto Tax)
Phantom gains describe situations where crypto investors face tax on gains while unable to offset losses, due to India's flat 30% tax and no set-off rule. This is informational.
Because India taxes each VDA gain at a flat 30% with no set-off of losses across coins or other income, a trader can end up paying tax even in a year of overall net losses — taxed on winning trades while losing trades give no relief. This effect is sometimes called phantom gains.
Added to the 1% TDS on each transfer, which locks up capital, frequent trading can become tax-inefficient. The structure discourages high-churn crypto trading.
Understanding this is important before active trading. This entry is informational only, not investment advice; crypto is high-risk and the tax regime is among the harshest in Indian law.
Related terms
- 30% Crypto Tax (India)India taxes income from transferring virtual digital assets at a flat 30% rate, with no deductions other than cost of acquisition and no set-off of losses. This is informational, not advice.
- 1% TDS on CryptoIndia levies a 1% tax deducted at source on the transfer of virtual digital assets above specified thresholds, creating an audit trail of crypto transactions. This is informational, not advice.
- No Set-Off Rule (Crypto)Under India's VDA tax rules, a loss from one crypto asset cannot be offset against gains from another or against any other income, nor carried forward. This is informational, not advice.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.