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CA Intermediate · Taxation · Set-Off or Carry Forward and Set-off of Losses

Ravi Traders has, for tax year 2026-27, a short-term capital loss of Rs 80,000 on sale of listed shares, a long-term capital gain of Rs 1,20,000 on sale of land, and a short-term capital gain of Rs 30,000 on sale of other shares. Ignoring all other income, what is the net capital gain chargeable, and how is the loss dealt with?

The net capital gain is Rs 70,000. A short-term capital loss can be set off against any capital gain, short-term or long-term. Rs 30,000 absorbs the short-term gain and the remaining Rs 50,000 reduces the long-term gain of Rs 1,20,000 to Rs 70,000.

  1. ARs 70,000 (short-term loss set off first against STCG of Rs 30,000 and the balance Rs 50,000 against LTCG of Rs 1,20,000)Correct
  2. BRs 1,50,000 (short-term loss is carried forward and not set off in this year)
  3. CRs 40,000 (short-term loss set off only against STCG, balance lost)
  4. DRs 1,20,000 (short-term loss set off only against LTCG)

Explanation

A short-term capital loss may be set off against both short-term and long-term capital gains. Rs 80,000 loss: Rs 30,000 against STCG, balance Rs 50,000 against LTCG leaving Rs 70,000 LTCG. Total net gain = Rs 70,000. Options restricting set-off to one type of gain are wrong because short-term loss is not so restricted.

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