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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Taxation (NISM XXI-A)

A PMS client has a short-term capital loss of Rs 40,000 on listed equity shares and a long-term capital gain of Rs 90,000 on other listed equity shares in the same year. Which statement about set-off is correct?

The short-term loss can be set off against the long-term gain, reducing it to Rs 50,000. Short-term capital losses may be adjusted against both short-term and long-term gains, whereas long-term losses can only be set off against long-term gains.

  1. AThe short-term loss can be set off against the long-term gain, reducing the gain to Rs 50,000Correct
  2. BThe short-term loss can only be set off against salary income
  3. CA short-term loss cannot be set off against any capital gain
  4. DThe short-term loss can be set off only against short-term gains and the long-term gain stays Rs 90,000

Explanation

A short-term capital loss can be set off against both short-term and long-term capital gains. Setting off Rs 40,000 against the long-term gain of Rs 90,000 leaves Rs 50,000. A long-term loss, by contrast, can be set off only against long-term gains.

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