Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
The set-off rules
Capital losses follow a clear hierarchy. A short-term capital loss is flexible — it can be set off against both short-term and long-term capital gains. A long-term capital loss is restricted — it can be set off only against long-term capital gains. Capital losses cannot be set off against salary or other ordinary income.
Carrying losses forward
If you can’t fully absorb a loss this year, you may carry it forward for 8 assessment years and set it against future capital gains under the same rules. The crucial condition: the loss is only carried forward if you filed the return by the due date. A belated return generally forfeits the carry-forward. Confirm the current rules per the Finance Act.
A worked example
Example: this year you have a ₹2 lakh short-term loss on shares and a ₹3 lakh long-term gain on property. The short-term loss can be set off against the long-term gain, leaving ₹1 lakh taxable. Had it been a long-term loss instead, it could still offset the long-term gain. File on time to keep any unused loss alive for next year. Our team can plan your set-offs.