NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Taxation (NISM XXI-A)
In a PMS account, a client's short-term capital loss on listed equity shares in a year can be treated how under income-tax law?
A short-term capital loss can be set off against both short-term and long-term capital gains in the year, and any balance is carried forward for later years. It cannot be set off against salary income or passed to the portfolio manager.
- ASet off against both short-term and long-term capital gains, with the balance carried forwardCorrect
- BSet off only against salary income
- CIgnored, since losses are not recognised
- DPassed on to the portfolio manager for set-off
Explanation
A short-term capital loss can be set off against any capital gain, short-term or long-term, in the same year. Any unabsorbed loss is carried forward for up to eight assessment years. It cannot be set off against salary income and belongs to the client, not the manager.
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