carry forward short term capital loss

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 July 2011 Case: A per son is engaged in the sale-purchase of shares (trading) through a recognized share broker. All shares belong to listed company and sale purchase is being made on intra-day basis (i.e. short term). Security Transaction Tax is also applicable on above relevant transactions.

Query: If such person face short loss in above transactions, can he carry forward his short term capital loss and offset against any capital gain in subsequent year(s) (i.e. up to 8 years). Person is also earning income from salary along with share trading.

Kindly update with relevant provisions.

CA. DINESH KUMAR

CA. DINESH KUMAR (Expert)

22 July 2011 Intra day trading is covered under secion 43(5) of Income tax act and the same shall be treated as speculation business loss/gain. As per Section 73 any loss from speculation business can be set off only against income from other speculation business. Further as per section 71 (2A) business loss whether speculative or non speculative can not be set off against salary income. So, you can not set off loss from intra day share trading any other income except profit from speculation business. As per section 73 a loss from speculation business can be carry forward to next 4 years and can be adjusted from income from speculation business. For your information i want to make it clear that loss/gain from delivery based share trading is treated as capital loss/gain. However trading in derrivatives is also not covered in section 43(5)

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Querist : Anonymous

Querist : Anonymous (Querist)

22 July 2011 Thanks for sharing your valuable comments with us. Kindly answer to one more query which is as follow:

Calculation of Amount of Loss =

Gross Loss (A-B) XXX
(-) STT xxx
(-) Brokerage Value (both xxx
on sale & purchase) ------
Net Loss XXX
------
Where A = Value of Purchase
B = Value of Sale

CA. DINESH KUMAR

CA. DINESH KUMAR (Expert)

23 July 2011 yes, you can deduct all these expenses while calculating gain/loss from speculation.

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