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

A PMS client incurs a short-term capital loss on listed equity shares sold in a financial year and also has a long-term capital gain on other listed equity shares in the same year. Under the general set-off rules, which statement is correct?

A short-term capital loss can be set off against both short-term and long-term capital gains of the same year. It cannot be set off against other heads like salary. Any unabsorbed loss can be carried forward, whereas long-term loss only offsets long-term gains.

  1. AA short-term capital loss can be set off only against short-term capital gains
  2. BA short-term capital loss can be set off against both short-term and long-term capital gainsCorrect
  3. CA short-term capital loss can be set off against salary income
  4. DA short-term capital loss cannot be set off at all and lapses immediately

Explanation

Short-term capital loss may be set off against both short-term and long-term capital gains in the same year. A long-term capital loss, by contrast, can be set off only against long-term capital gains. Capital losses cannot be adjusted against salary income, and unabsorbed losses can be carried forward.

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