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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Equity Products

Caselet: Vikram has an unabsorbed short-term capital loss of Rs 80,000 from listed equity shares in the current year and long-term capital gains of Rs 2,50,000 on other STT-paid listed shares. He has no other gains. Which statement is correct about setting off the loss?

A short-term capital loss can be set off against long-term gains. Vikram's net long-term gain becomes Rs 1,70,000, and after the Rs 1.25 lakh exemption Rs 45,000 is taxed at 12.5%. It cannot be set off against salary income.

  1. AThe short-term loss can be set off against the long-term gain, leaving LTCG of Rs 1,70,000, of which Rs 45,000 is taxable at 12.5%Correct
  2. BThe short-term loss cannot be set off against long-term gains
  3. CThe loss can be set off only against salary income
  4. DThe loss reduces the tax directly by 20% of Rs 80,000 with no change in gains

Explanation

Short-term capital loss can be set off against both short-term and long-term capital gains. Net LTCG = 2,50,000 - 80,000 = 1,70,000. After Rs 1,25,000 exemption, taxable = Rs 45,000, taxed at 12.5%. Long-term losses, by contrast, can be set off only against long-term gains.

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