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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 long-term capital loss of Rs 40,000 on listed equity in a year, with no long-term gains in that year. Which statement about this loss is correct under the general capital gains rules?

A long-term capital loss can be set off only against long-term capital gains and, if not absorbed, carried forward for up to 8 assessment years, provided the return is filed by the due date. It cannot be set off against salary or other heads.

  1. AIt can be set off against salary income of the same year
  2. BIt can be set off only against long-term capital gains and carried forward for up to 8 assessment yearsCorrect
  3. CIt can be set off against short-term capital gains only, and cannot be carried forward
  4. DIt lapses at the end of the year

Explanation

A long-term capital loss can be set off only against long-term capital gains, not against other heads or short-term gains alone as a restriction on the loss. Unabsorbed loss can be carried forward for 8 assessment years, provided the return is filed on time. Salary set-off is not permitted for capital losses.

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