What is P/L (Profit & Loss)?
Crypto Glossary Definition
A statement that calculates the profit or loss for a time period.
Why P/L (Profit & Loss) Matters
Tracking realized P/L (from trades already closed) separately from unrealized P/L (paper gains/losses on positions still open) matters a lot in crypto specifically because of tax treatment — many jurisdictions, including India, only tax realized gains, so an unrealized paper profit isn't a taxable event until the position is actually sold.
P/L (Profit & Loss) in Practice
At the end of the tax year, an Indian crypto investor sits down to reconcile his trading activity and quickly realizes he needs to separate two very different numbers. His realized P/L covers only the trades he actually closed during the year, positions he bought and then fully sold, converting paper gains into an actual taxable event. His unrealized P/L, on the other hand, reflects positions he's still holding, coins that have appreciated significantly on paper but that he hasn't sold yet. Under Indian tax rules, only that realized figure matters for this year's return, since gains on assets still sitting in his wallet aren't considered taxable until he actually disposes of them. This distinction matters practically, too: earlier in the year he'd watched one position swing wildly, showing a large unrealized profit at one point and then giving most of it back before he ever sold, meaning that impressive paper gain never became real, taxable income at all. He builds a simple spreadsheet tracking both figures separately going forward, since conflating an unrealized gain with an actual profit is a common mistake that can leave investors overestimating both their real returns and, eventually, their tax liability.
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