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

A trader has the following non-speculative F&O results in a year: profit of Rs 8 lakh from index options and loss of Rs 11 lakh from stock futures. He also has Rs 2 lakh of salary income. Under the general tax rules, which statement is correct?

The net non-speculative business loss of Rs 3 lakh cannot be set off against salary income, but it can be carried forward for up to 8 assessment years against future business income, provided the return is filed within the due date.

  1. AThe net non-speculative loss of Rs 3 lakh can be set off against salary income in the same year
  2. BThe net non-speculative loss of Rs 3 lakh cannot be set off against salary income but can be carried forward for 8 yearsCorrect
  3. CThe net loss can be carried forward for only 4 years
  4. DThe loss is treated as a capital loss

Explanation

Both are non-speculative business items, so they net to a loss of Rs 3 lakh. Business losses cannot be set off against salary income. The non-speculative business loss can be carried forward for 8 years and set off against business income, if the return is filed on time. Treating it as capital loss or a 4-year carry forward is wrong.

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