25 July 2025
### **Can Brought Forward Losses from Short-Term Capital Gain (STCG) be Set Off?**
Yes, **brought forward losses** from **Short-Term Capital Gains (STCG)** can be set off, but the set-off is subject to specific rules outlined under the **Income Tax Act, 1961**.
Here are the relevant details and sections that govern the set-off of **short-term capital losses**:
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### **1. Set-off of Short-Term Capital Loss Against Other Income**:
* As per **Section 70(1)** of the **Income Tax Act, 1961**, **short-term capital losses** can be **set off** only against **short-term capital gains** or **long-term capital gains** (not other types of income like salary, business income, etc.).
* **Set-off against Short-Term Capital Gain (STCG)**:
* If you have incurred **STCG loss** in a given financial year, this loss can be set off against the **STCG** in the same year, i.e., the loss arising from the sale of short-term assets can offset short-term gains from the sale of other assets.
* **Set-off against Long-Term Capital Gain (LTCG)**:
* Any **remaining STCG loss**, after setting off against STCG in the same year, can also be **set off against Long-Term Capital Gain (LTCG)** in the same year.
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### **2. Brought Forward Losses**:
* According to **Section 71B**, if you are not able to set off your **short-term capital loss** (STCL) within the same year, you are allowed to **carry forward the loss** to the next year and **set off** the brought forward loss against **capital gains** (both STCG and LTCG) in future years.
* **Carry forward of loss** can happen for **up to 8 years**. So, you can carry forward the loss and adjust it against future capital gains (either short-term or long-term) for the next 8 years.
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### **3. Important Conditions for Carrying Forward Losses**:
* To **carry forward short-term capital loss** (STCL) to future years, the **income tax return must be filed on time** (before the due date) for the year in which the loss is incurred.
* If the return is not filed within the due date, the **loss cannot be carried forward**.
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### **4. Can STCG Losses be Set Off by Any Gain?**
* **No, short-term capital gains (STCG) losses cannot be set off against just any type of gain**.
* **STCG losses** can only be set off against **STCG** or **LTCG** (long-term capital gains). * **STCG losses cannot be set off against income** from salary, business, or other sources.
* However, the **loss from STCG** can be set off in the following order:
1. **STCG in the same year**. 2. If any **STCG loss** remains, it can be set off against **LTCG**. 3. If the loss is still **unadjusted**, it can be **carried forward** to subsequent years.
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### **Relevant Sections in the Income Tax Act:**
1. **Section 70(1)**: Set-off of short-term capital loss against short-term or long-term capital gains in the same year. 2. **Section 71B**: Carry-forward and set-off of short-term and long-term capital losses in subsequent years. 3. **Section 72**: Carry-forward of **business losses** (not applicable here but may be useful in other contexts). 4. **Section 10(38)**: Exemptions relating to long-term capital gains on certain investments (shares, mutual funds, etc.).
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### **Example:**
Suppose you have the following:
* **STCG** (on shares): ₹50,000 * **STCL** (on shares): ₹30,000
You can **set off** the ₹30,000 loss from the ₹50,000 gain, resulting in a **net taxable STCG** of ₹20,000.
If your **STCL** is ₹30,000 and you don't have any STCG in that year, you can carry forward the **remaining loss of ₹30,000** to future years, where you can set it off against **future capital gains** (either STCG or LTCG).
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### **Summary:**
1. **STCG Loss** can be **set off against STCG** or **LTCG** in the same year. 2. If you can't utilize the loss in the same year, you can **carry forward** the loss for **up to 8 years** and set it off against **capital gains** in future years. 3. **Losses from STCG** **cannot** be set off against other types of income like salary or business income. 4. Ensure that you file the return **on time** to carry forward any capital losses.
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Let me know if you'd like further clarification or examples!
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