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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Accounting and Taxation

A trader has a business loss of Rs 3,00,000 from equity options in a financial year and no other business income. Which statement is consistent with the tax treatment of this loss?

A non-speculative business loss from equity options can be carried forward for eight assessment years and set off against business income, provided the return is filed by the due date. It cannot be set off against salary income and is not a capital loss.

  1. AIt can be set off against salary income in the same year
  2. BIt is treated as long-term capital loss and carried forward for 8 years
  3. CIt is ignored for tax purposes since options are not delivered
  4. DIt can be carried forward for 8 assessment years against non-speculative business income, if the return is filed on timeCorrect

Explanation

Non-speculative business loss cannot be set off against salary income, but can be carried forward for 8 assessment years and set off only against business income, provided the return is filed by the due date. It is not a capital loss.

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