Set off of short term capital loss
This query is : Resolved
26 August 2015
Suppose i had short term capital loss in last year of Rs. 50000/- which is c/f in current year.
In current year i have short term capital gain of Rs. 60000/-, so now in this case will i pay capital gain tax on Rs. 10000/- after set off of last year loss or will i pay capital gain tax on complete amount of Rs. 60000/- ?
In current year i have short term capital gain of Rs. 60000/-, so now in this case will i pay capital gain tax on Rs. 10000/- after set off of last year loss or will i pay capital gain tax on complete amount of Rs. 60000/- ?
26 August 2015
No you will pay tax only on net amount after set off i.e. Rs. 10000/-.
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26 August 2015
Can it also be done in the manner that while preparing tax computation for current year i do pay short term capital gain tax on entire Rs. 60000/- and subsequently Rs.50000/- is being deducted from my Gross taxable income.
25 July 2025
In the situation you've described, where you have a **short-term capital loss** (STCL) of ₹50,000 from the previous year and **short-term capital gain** (STCG) of ₹60,000 in the current year, the **set-off of capital loss** is done in a specific way under the Income Tax Act.
### **Answer to Your Query:**
#### 1. **Set-off Mechanism:**
* **Short-term capital losses** can be **set off** against **short-term capital gains** in the current year.
* So, your **₹50,000 loss** from the previous year can be set off against the **₹60,000 gain** in the current year.
* The remaining **net gain** after set-off would be **₹10,000** (i.e., ₹60,000 gain - ₹50,000 loss = ₹10,000).
* Therefore, **you will pay tax on ₹10,000** and **not on the entire ₹60,000**.
#### 2. **Tax Computation Process:**
* You will **not** pay tax on the entire ₹60,000 first and then claim a deduction of ₹50,000 from your gross income. The loss should be **set off first** before computing the tax liability.
* The correct way is to set off the **₹50,000 short-term capital loss** against the **₹60,000 short-term capital gain**, which gives you a **net gain of ₹10,000**.
This means that the final **taxable amount** is **₹10,000** and **not ₹60,000**.
#### 3. **Important Points:**
* If the **capital loss** is greater than the **capital gain** in a particular year, you can carry forward the remaining loss to future years (for a maximum of **8 years** under the current tax provisions) and set it off against **future capital gains**.
* The loss must be **set off against the same type of gain** (i.e., **short-term loss** can only be set off against **short-term gain**).
---
### **Summary:**
* In your case, you will **pay tax only on the net amount** of **₹10,000** after **set off**.
* You **cannot** pay tax on the full ₹60,000 and then deduct ₹50,000 from your gross income. The **set-off** must be done **first**, and the remaining **₹10,000** will be your taxable capital gain.
---
This method ensures that you're only taxed on the **net capital gain** after considering the **carry-forward loss**.
Let me know if you'd like further clarification!
### **Answer to Your Query:**
#### 1. **Set-off Mechanism:**
* **Short-term capital losses** can be **set off** against **short-term capital gains** in the current year.
* So, your **₹50,000 loss** from the previous year can be set off against the **₹60,000 gain** in the current year.
* The remaining **net gain** after set-off would be **₹10,000** (i.e., ₹60,000 gain - ₹50,000 loss = ₹10,000).
* Therefore, **you will pay tax on ₹10,000** and **not on the entire ₹60,000**.
#### 2. **Tax Computation Process:**
* You will **not** pay tax on the entire ₹60,000 first and then claim a deduction of ₹50,000 from your gross income. The loss should be **set off first** before computing the tax liability.
* The correct way is to set off the **₹50,000 short-term capital loss** against the **₹60,000 short-term capital gain**, which gives you a **net gain of ₹10,000**.
This means that the final **taxable amount** is **₹10,000** and **not ₹60,000**.
#### 3. **Important Points:**
* If the **capital loss** is greater than the **capital gain** in a particular year, you can carry forward the remaining loss to future years (for a maximum of **8 years** under the current tax provisions) and set it off against **future capital gains**.
* The loss must be **set off against the same type of gain** (i.e., **short-term loss** can only be set off against **short-term gain**).
---
### **Summary:**
* In your case, you will **pay tax only on the net amount** of **₹10,000** after **set off**.
* You **cannot** pay tax on the full ₹60,000 and then deduct ₹50,000 from your gross income. The **set-off** must be done **first**, and the remaining **₹10,000** will be your taxable capital gain.
---
This method ensures that you're only taxed on the **net capital gain** after considering the **carry-forward loss**.
Let me know if you'd like further clarification!
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