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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 realised a short-term capital loss on one listed equity share and a long-term capital gain on another in the same financial year. Which general rule on set-off applies?

A short-term capital loss can be set off against both short-term and long-term capital gains in the same year. A long-term capital loss is the one limited to long-term gains, so the claim that short-term losses go only against short-term gains is wrong.

  1. AShort-term capital loss can be set off against long-term capital gain as well as short-term capital gainCorrect
  2. BShort-term capital loss can be set off only against salary income
  3. CShort-term capital loss cannot be set off against any gain
  4. DShort-term capital loss can be set off only against short-term gains

Explanation

Under the general rule, a short-term capital loss may be set off against both short-term and long-term capital gains. A long-term capital loss, by contrast, can be set off only against long-term gains. Salary income cannot absorb capital losses.

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