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FAQs (Frequently asked Questions)on capital losses and its set-off

  • I have incurred a short term loss from redemption or sale of mutual funds of Rs 20,000. I have made long term gains from the sale of listed equity shares of Rs 50,000 during the FY 2018-19. Can I claim set-off of the loss against the gains? How can I claim the set-off of the losses?
    You can set off short term loss from redemption or sale of mutual funds against long term gains on the sale of listed equity shares. You will be required to pay long term capital gains tax on the balance amount of Rs 30,000 (Rs 50,000 – Rs 20,000). You have to report both the transaction of short term loss and long term gain in the income tax return.
  • I have sold debt mutual funds and made long term loss of Rs 30,000. I have sold liquid funds at short term capital gains of Rs 40,000. Can I set off the long term loss against the short term capital gain and pay tax on the net amount.
    You cannot set off the long term loss against the short term gain. You have to pay tax on the entire short term capital gains of Rs 40,000. You can carry forward the long term loss of Rs 30,000 for 8 successive years and are entitled to reduce the same against any long term capital gain in the future 8 successive years.
  • I made short term gains of Rs 25,000 on sale of listed equity shares. I incurred a short term loss of Rs 40,000 on sale of mutual fund investments. Can I reduce the short term loss against the short term gains on mutual fund investments? Am I required to disclose the net loss in the income tax return filing?
    You can reduce the short term capital loss against short term capital gains. You have to report both the transactions while filing your income tax return. The net short term capital loss of Rs 15,000 (Rs 40,000 – Rs 25,000) can be carried forward for 8 successive years.
  • I sold unlisted equity shares and made a long term gain of Rs 5 lakh. I sold listed equity shares and incurred a long term capital loss of Rs 1 lakh and a short term capital loss of Rs 50,000. Can I reduce my losses against my gains and pay tax on the net amount?
    You can reduce your long term losses against long term capital gains. You can also reduce your short capital loss from your long term capital gains. Your net taxable long term capital gain would be Rs 3,50,000 (Rs 5,00,000 – Rs 1,00,000 – Rs 50,000).
  • I have sold listed equity shares and made a long term gain of Rs 80,000. I also incurred a long term loss of Rs 20,000 on sale of listed equity shares. Can I reduce my long term loss from the long term gain and pay tax on the balance? Should I report both the transactions of gain and loss while filing my income tax return?
    You can reduce your long term loss on listed equity against the long term gains made on listed equity. Your net taxable long term capital gain would be Rs 60,000 (Rs 80,000 – Rs 20,000). While filing your income tax return, you need to report the transactions where you made a gain as well as loss.
  • I have sold gold jewellery which I bought 20 years ago. The jewellery was bought for Rs 50,000 in 1999. I have sold the jewellery for Rs 2,00,000. Am I liable to pay tax on the gains on the sale of the jewellery? I have also incurred short term loss of Rs 20,000 on the sale of listed shares.
    You have to calculate your long term capital gain or loss by reducing the indexed cost of purchase against the sale price of the jewellery. You can index or inflation adjust the cost using the cost inflation index notified by the income tax department. You can reduce the short term loss against the long term gains. You have to pay tax at 20% on the balance long term gain.
  • I have income from business. I have a short term capital loss on the sale of listed equity shares of Rs 30,000 and long term capital loss of Rs 20,000. Can I reduce the loss against income from business?
    You cannot reduce short term capital loss or long term capital loss from your income from business. Your income from business would be taxed at the slab rates. You can carry forward the short term capital loss for up to 8 successive years and are entitled to reduce the same against any capital gain in the future 8 successive years. You can also carry forward your long term capital loss and reduce the same from any long term capital gains in the successive 8 years.
  • I have a long term capital gain of Rs 4 lakh obtained from my share in the sale of ancestral land. I also have long term loss of Rs 40,000 on the sale of listed shares. Can I reduce the loss from my share of the gain on the land?
    You can reduce the long term loss on the sale of listed shares against the long term capital gain. You can pay tax on the balance gains of Rs 3,60,000 at 20%.
  • I have sold a house property for Rs 80 lakh and made a long term indexed gain of Rs 60 lakh, after adjusting for cost inflation index. I have bought another residential house for Rs 55 lakh. I have also sold listed equity shares and made a long term capital gain of Rs 1 lakh. I understand both the long term capital gains are exempt. Should I file an income tax return for both the transactions?
    You have to file your income tax return and claim both the capital gain exemptions. The long term capital gain on sale of the residential house has to be declared, with detail of investment in the new residential house. You have to claim the exemption under section 54 of the Income-tax act. Secondly, on long term capital gains on listed equity shares have to be declared in the return. However, the long term gains would not be taxable up to Rs 1 lakh.
  • I have sold old gold jewellery for Rs 25 lakh. I plan to use the money to buy a flat. Will I get an income-tax exemption for the capital gains on the sale of gold jewellery?
    You have made a long term gain on gold jewellery held for more than 3 years. The income tax law allows you to claim an exemption for the investment of sale proceeds in the purchase of immovable property or a flat. The exemption is available under section 54F of the income tax act.
  • I sold vacant land held by me since the year 1995. I sold the land for Rs 2 crore. I intend to purchase 2 residential flats with the sale proceeds. Can I claim any tax exemption for the same?
    The land held by you is a long term capital asset. You are entitled to a tax exemption in respect of investment towards one of the houses only. You have to calculate your long term capital gain on the sale. Then claim an exemption in the proportion of the investment. You have to pay tax on the balance gains. You have to index the cost using the cost inflation index and calculate the gains on it. The gains would be taxable at the rate of 20%.
  • I sold an old house bought in 1990 for Rs 2 crore. I intend to purchase 2 flats for Rs 2 crore. Can I claim any tax exemption for the same?
    You would be making a long term capital gain on the sale of the house. The income tax law allows for a tax exemption on the long term capital gains arising on sale of a residential house. A taxpayer can invest the capital gains in up to 2 residential houses and claim income tax exemption on the gains.
  • FAQs (Frequently asked Questions)onBusiness Losses

  • I carry on a business of trading in goods. It is a newly started business. I have incurred a loss of Rs 1,30,000. I also have income from FD interest of Rs 3,00,000. Can I reduce my business loss against my interest income?
    You can reduce your business loss against interest income. Your net income would be Rs 1,70,000 (Rs 3,00,000-Rs 1,30,000). Your net income would be below taxable limit. However, you have to file an income tax return and report the interest income and business loss. You can claim the set off of business loss against interest income in the income tax return.
  • I have started a business of providing interior decorator services. I have incurred a loss of Rs 2,50,000. I do not have any other income. Should I file an income tax return? Can I claim the loss from profession?
    You can reduce your business loss against interest income. Your net income would be Rs 1,70,000 (Rs 3,00,000-Rs 1,30,000). Your net income would be below taxable limit. However, you have to file an income tax return and report the interest income and business loss. You can claim the set off of business loss against interest income in the income tax return.
  • I carry on a business of trading in goods. It is a newly started business. I have incurred a loss of Rs 1,30,000. I also have income from FD interest of Rs 3,00,000. Can I reduce my business loss against my interest income?
    You can reduce your business loss against interest income. Your net income would be Rs 1,70,000 (Rs 3,00,000-Rs 1,30,000). Your net income would be below taxable limit. However, you have to file an income tax return and report the interest income and business loss. You can claim the set off of business loss against interest income in the income tax return.
  • I have started a business of providing interior decorator services. I have incurred a loss of Rs 2,50,000. I do not have any other income. Should I file an income tax return? Can I claim the loss from profession?
    You can claim the loss from profession. You have to file an income tax return for claiming the losses under the head ‘income from business or profession’, by giving the details of your income and expenses. You can carry forward the loss up to 8 successive assessment years to set off against any income from business or profession in future.
  • I have a loss from business of rendering software development services of Rs. 3,30,000. I have long term capital gains from the sale of shares of Rs 1,20,000. Can I reduce the capital gains from the business loss?
    You can reduce the capital gains from your business loss. Your net loss would be Rs 2,10,000 (Rs 3,30,000-Rs 1,20,000). You have to report the capital gains on the sale of shares in the income tax return. You should also provide the details of your business loss in the income tax return. You can claim the set off of the capital gains against business loss in the return and carry forward the net loss from business of Rs 2,10,000 up to 8 successive assessment years to set off against any income from business or profession in future.
  • I have done intra-day trading in shares. I have incurred a net loss of Rs 2 lakh from the trading activity. I have income from my business of retail sale of goods of Rs 3 lakh. Can I reduce my loss from trading in shares with business income?
    Your trading activity in shares is a speculative business. Your loss from the intra-day trading in shares can be reduced only against income from speculation business. You cannot reduce the loss from your regular business income. You can carry forward the loss of Rs 2 lakh for 4 successive assessment years to set off against any gain from any speculative business. You have to pay taxes on the income from the regular business of Rs 3 lakh while filing your return.
  • I have made gains on intra-day trading in shares of Rs 5 lakh. I have incurred a loss of Rs 2 lakh from a newly started business. Can I reduce my loss from the gains and pay taxes on the balance income of Rs 3 lakh?
    You can reduce your loss from the regular business against speculation gains. Your net taxable income would be Rs 3 lakh (Rs 5 lakh-Rs 2 lakh). You have to report the loss from the regular business as well as the speculative gains while filing your income tax return.
  • I have incurred a loss of Rs 5 lakh from business during the year. I have a rental income of Rs 2 lakh from house property. Can I reduce the rental income from the loss?
    You can set off the rental income from the loss from business. Your net loss from the business would be Rs 3 lakh (Rs 5 lakh-Rs 2 lakh). You can carry forward the loss up to 8 successive assessment years to set off against income from business in the future.
  • I have a loss from house property of Rs 1.5 lakh. I have paid interest on home loan taken for the construction of the house. I have income from business of Rs 5 lakh. Can I reduce my loss from house property against income from business?
    You can reduce the loss from house property from income from business. Your net income would be Rs 3.5 lakh (Rs 5 lakh-Rs 1.5 lakh). You have to report the loss from house property while filing your income tax return.

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