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

A PMS client's portfolio realises a short-term capital loss of ₹60,000 on one stock and a long-term capital gain of ₹1,50,000 on another in the same year. Under the general rule for set-off, what is the position?

The short-term loss can be set off against the long-term gain, leaving a net long-term capital gain of ₹90,000. Short-term capital losses may be adjusted against both short-term and long-term gains, whereas long-term losses may only be set off against long-term gains.

  1. AThe short-term loss can be set off against the long-term gain, leaving ₹90,000 of long-term gainCorrect
  2. BThe short-term loss cannot be set off against any capital gain
  3. CThe short-term loss can only be set off against salary income
  4. DThe long-term gain is exempt, so no set-off is needed

Explanation

A short-term capital loss can be set off against both short-term and long-term capital gains. Net long-term gain = 1,50,000 - 60,000 = ₹90,000. A long-term loss, by contrast, can be set off only against long-term gains.

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