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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 the following realised results in a year: short-term capital gain of Rs 3,00,000 on equity and long-term capital loss of Rs 1,00,000 on equity. Which statement about set-off is correct under the general rules?

Long-term capital loss can be set off only against long-term capital gains. It cannot reduce short-term gains or other heads such as salary, though any unadjusted loss can be carried forward for eight assessment years if the return is filed on time.

  1. ALong-term capital loss can be set off against short-term capital gain
  2. BLong-term capital loss can be set off only against long-term capital gainCorrect
  3. CLong-term capital loss can be set off against salary income
  4. DLong-term capital loss is ignored forever and cannot be carried forward

Explanation

A long-term capital loss can be set off only against long-term capital gains and can be carried forward for 8 assessment years. Hence it cannot reduce the Rs 3,00,000 short-term gain or salary income. The option saying it cannot be carried forward is wrong because carry-forward is allowed.

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