Does Equity Long Term Gain offsets Short Term losses

Taxation
1

I thought that Long term and Short team gains/losses belonged to different buckets from taxation perspective.

My auditor however tells that Equity Long term capital GAINS will ALWAYS offset short term capital LOSSES (but not vice versa)

please confirm… @Quicko

2

Your auditor is right.

STCG is taxed at higher rate than LTCG, so Govt tries it’s best to not let you carry forward your STCL to next year. And forces you to reduce / offset your STCL with LTCG which has lower tax rate.

However, LTCL cannot be offset or reduced by STCG because LTCG is itself raxed at lowest rate.

This is done to maximize Govt’s tax revenue.

3 Likes
3

Oh ok. Is this mandatory or can one choose to NOT offset while filing taxes ? @Quicko @Praksy

4

You can carry forward your losses only after you set it off first against other heads.
So it’s mandatory to set it off.

5

It is mandatory to reduce / offset your losses. In fact, when you input all your profits and losses in the ITR utility, it will automatically reduce / offset the losses. There is no way out.

6

Thanks @Jason_Castelino. Just spoke to my auditor and he said the same thing that @Praksy pointed that it is all automatic and there is no way out once you enter all in the ITR.

7

Hi @Ddude,

Long term and Short term Capital Gains are taxed at different rates depending upon the type of asset. However, any Short Term Capital Loss can be adjusted against Short Term as well as Long Term Capital Gains. But Long Term Capital Loss can only be adjusted against Long Term Capital Gain.

Also, even after adjustment, losses remain unadjusted they can be carried forward for 8 years and can be adjusted against income in those years.

Hope this helps!