Adjustment of BF loss wrt cg exemption of 1 lakh

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This discussion clarifies the tax treatment of long-term capital gains (LTCG) from ELSS funds concerning the Rs 1 lakh exemption and brought forward losses. The consensus is that current year gains are first offset against brought forward losses before the Rs 1 lakh exemption is applied. This means the Rs 1 lakh exemption may not be fully utilised if current year gains are less than the brought forward losses, a point acknowledged as being unfavourable but legally mandated.

hemang shukla

hemang shukla (Querist)

08 March 2024 You don’t incur LTCG tax on capital gains from ELSS up to Rs 1 lakh , is the 1 lakh limit only after adjustment of brought forward loss.

for example, BF loss is 4 lakh and capital gains for current year is 2 lakh. can i first adjust CY gain of 2 lakh with the exemption limit of 1 lakh and the balance remaining 1 lakh against loss BF of 4 lakh leaving 3 lakh to be carried forward; or will the CY gain of 2 lakh be first adjusted against BF losses of 4 lakh leaving no adjusted CY gains and exemption limit of 1 lakh unutilised. ( meaning it may be better to book gains 1 lakh greater than BF loss, to better fully utilise exemptions )