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IAI Actuarial Core Principles · Business Finance · Personal and corporate taxation

An individual has a capital loss on the sale of a long-term asset in a year. Under the general approach to capital loss set-off in Indian income tax, which is correct?

A long-term capital loss may be set off only against long-term capital gains, and any unabsorbed balance can be carried forward for later years. It cannot be set off against salary or business income, so the other statements are wrong.

  1. AA long-term capital loss can be set off only against long-term capital gains, and unabsorbed amounts can be carried forwardCorrect
  2. BIt can be set off against salary income of the same year
  3. CIt can be set off against any income including business profits
  4. DIt is lost permanently if not used in the same year
  5. It can be set off against short-term gains only

Explanation

Long-term capital losses are restricted to set-off against long-term capital gains, and any balance can be carried forward for a limited number of years. They cannot reduce salary or business income.

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