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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Taxation

Under the rules taught in NISM-Series-V-A, an investor has equity-fund capital losses and gains. Which of the following correctly describes set-off of capital losses?

A short term capital loss can be set off against both short term and long term capital gains, while a long term loss can offset only long term gains. Any unadjusted capital loss is carried forward for eight assessment years.

  1. ALong term capital loss can be set off against short term capital gain only
  2. BShort term capital loss can be set off against both short term and long term capital gains, and unadjusted loss is carried forward for 8 assessment yearsCorrect
  3. CCapital losses can be set off against salary income of the same year
  4. DCapital losses cannot be carried forward at all

Explanation

A short term capital loss can be set off against any capital gain, short or long term, whereas a long term capital loss can be set off only against long term gains. Unabsorbed capital losses are carried forward for 8 assessment years. They cannot be set off against salary income.

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