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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Concepts in Taxation

Ms. Anita Rao, a resident, has the following in a year: salary income Rs 14,00,000 (taxable), loss from house property Rs 1,50,000 (self-occupied property interest, assumed allowable), and short-term capital loss of Rs 2,00,000 from shares. Assume current law on set-off of losses and a Rs 2,00,000 house property loss set-off limit against other heads. What is the correct treatment?

The house property loss of Rs 1,50,000 can be set off against salary because it is within the Rs 2,00,000 limit. The short-term capital loss cannot be set off against salary and must be carried forward to be adjusted only against future capital gains.

  1. ASet off house property loss of Rs 1,50,000 against salary; carry forward the short-term capital loss to set off only against capital gains in later yearsCorrect
  2. BSet off both losses against salary income this year
  3. CCarry forward both losses and pay tax on Rs 14,00,000
  4. DSet off the capital loss against salary and carry forward the house property loss

Explanation

House property loss up to Rs 2,00,000 can be set off against other heads such as salary, so Rs 1,50,000 reduces salary income to Rs 12,50,000. Capital losses cannot be set off against salary; a short-term capital loss can only be set off against capital gains and carried forward for 8 years. The other options violate these rules.

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