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

A PMS client's portfolio has a short-term capital loss of Rs 50,000 on listed equity shares and a long-term capital gain of Rs 3,00,000 on listed equity shares in the same year. Under the general set-off rules, the short-term capital loss can be:

A short-term capital loss can be set off against both short-term and long-term capital gains. So the Rs 50,000 loss reduces the Rs 3,00,000 long-term gain to Rs 2,50,000. It cannot be set off against salary income.

  1. ASet off only against short-term capital gains
  2. BSet off against both short-term and long-term capital gainsCorrect
  3. CSet off against salary income
  4. DNot set off at all and not carried forward

Explanation

A short-term capital loss can be set off against both short-term and long-term capital gains. Here it reduces the Rs 3,00,000 long-term gain to Rs 2,50,000. The restriction to short-term gains applies to long-term losses in the opposite direction, which can be set off only against long-term gains. Capital losses cannot be set off against salary.

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