How to adjust capital gains against capital losses in ITR

Synopsis

An individual taxpayer can bring down his/her tax liability by setting off capital gains from one asset with capital losses in another asset. Here’s how it can be done.

If you are not able to set off your entire capital loss in the same year, both short-term and long-term loss can be carried forward for up to eight assessment years.
Losses made on one investment can be set off against gains from other assets. Here are some points to keep in mind when you do so.

  • Capital losses (short-term or long-term) cannot be set off against any other head of income such as salary, rent or interest.
  • Long-term capital losses can be set off only against long-term capital gains.
  • But short-term capital losses can be set off against short-term or long-term capital gains. Even short-term capital losses from stocks can be set off against other short- or long-term capital gains.
  • Till recently, long-term losses from stocks or equity funds could not be adjusted against other gains because these were tax-free. But now that long-term gains from stocks and equity funds are taxable, they can be set off against other long-term gains.
  • If you are not able to set off your entire capital loss in the same year, both short-term and long-term loss can be carried forward for up to eight assessment years.
  • Capital losses for a year can’t be carried forward unless that year’s return has been filed before due date. Also, returns of subsequent years will have to be filed to carry forward the loss. Even if you do not have any income that year, file your return before the due date to carry forward the loss.