Can I offset the STCG from Debt MF against STCL from equities?

Taxation
1

I have booked STCL of worth 9k from Equity.
I have gains of 44k from STCG with Debt MF.

  1. I can offset the losses from Equity and should pay tax on 35k based on the Slab rate, right ?

I have booked LTCL of 20k. And having 3.5k profit realised from Debt MF.

  1. Can I offset this Profit with the Loss ?

I am planning to withdraw lumpsum from the equities with LTCG of around 1.5 Lakh(Unrealised).
3) What would be my total LTCG considering the above scenario ?
4) Will chronology be taken into account and the Debt MF gains can be offset against the Equity LTCL ?

@ShubhS9 @Akash_Shah @Bhuvan can you help me with this ?

2

@Quicko

1 Like
3

Hi Sriram,

  1. yes, you can offset the STCL from equity with STCG of Debt MF.
  2. Long term capital loss cannot be setoff against the short term capital gain. The â‚ą20k loss will be carried forward.
  3. Consider the point 1 & 2 - for you exemption under section112A up to rs 1,25,000 would be available and need not pay tax on LTCG upto 1.25lakhs.
  4. As per Income Tax act the sale debt mutual funds are always treated as Short term capital gain hence , will not be able to set off.

Regards,
CA. Shreyas Raj N
[email protected]

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4

what are you trying to do ?

5

It seems it was tagged to quickoo as they are into tax related .

1 Like
6

Hello @sriramnpkt

  1. Yes, Short term losses from equity can be set off against short term capital gains from debt mutual funds and pay tax on remaining gains.

  2. Yes Long term capital loss can be set off against profit from debt Mutal funds.

  3. Considering above scenario LTCG would be Rs. 150000 less 20000 taxable Rs. 130000 (approx.)

  4. Since debt MF are always considered STCG it can be offset against LTCL.

Thanks

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7

Regarding the Fourth Question,
the Debt MF was bought before the latest STCG only rule came into effect approx before 1 Apr 2023.

I have 9k realised LTCL from Equity, followed by 3.5k LTCG from Debt.
Before the end of March 2027, I would have realised 1.5L LTCG from Equity.

Considering the chronology, can you reassess your answer ?

8

@sriramnpkt

The chronology of gains or loss is not taken into consideration for calculating net capital gains. Its the rate of capital gains even though in same head that is considered. So in the question above the LTCL of 9000 from Equity would be first completely set off against LTCG of Rs. 150000 from equity, so remaining LTCG from equity would be Rs. 141000 and LTCG of Rs 3500 from debt mutual funds (since they have been purchased before 01 April, 2023 so deemed short term capital gains would not apply.

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9

I heard that LTCG from Debt MF will not be exempted under the 1.25 lakh exemption.
So I have to pay 12.5% of 16k(1.41L minus 1.25L from the exemption) which comes to 2k,
and 9k LTCG from Debt MF assuming 25% tax slab, it comes to 2250.

so a total of 4250 needs to be paid as taxes(assuming that there are no further additions), is that right ?

10

Yes, that is right assuming that there are no changes in slabs or additions to this income.

@sriramnpkt

1 Like
11

@Quicko Shouldn’t it be 12.5% x 9k as this debt MF is NOT deemed STCG as it was bought before 2023?

12

I had one more question regarding the “Short Term Profit Debt Funds”.
I had made a Short Term Realised Loss of 8963 in Equity.

  1. Will it be offset against the Short Term Realised Profit of 64253, I have made from the Debt MF.
  2. If yes(assuming yes from our earlier conversation), am I calculating the tax to be paid correctly ?
    64253(Debt profit) - 8963(Equity loss) = 55290
    Assuming, 25% slab rate, I have to pay a tax of 13823 approximately, right ?
13

Hello @sriramnpkt

Yes, that’s right short term losses from equity can be offset against short term profit from debt funds, assuming that the approx. tax liability calculated is correct.