Bankrupt company ncd invested

Hey! Sorry to hear about your NCD investment loss with SREI.

Here’s what you can do on tax front:

Treatment of loss on unsecured NCDs of bankrupt company:

1. Capital Loss:
   The loss on NCD (Non-Convertible Debenture) investment is treated as a capital loss since NCDs are capital assets.

2. Type of Capital Loss:

   • Since NCDs have a maturity date and are not traded frequently like shares, they are considered long-term capital assets if held for more than 36 months, else short-term.

   • If held for more than 36 months, loss is a long-term capital loss (LTCL).

   • Otherwise, it is a short-term capital loss (STCL).

3. Set-off and Carry Forward:

   • STCL can be set off against any capital gains (short-term or long-term) in the same financial year.

   • LTCL can only be set off against long-term capital gains.

   • If you cannot fully set off the loss in the current year, you can carry forward the capital loss for 8 subsequent years and set off against eligible capital gains.

4. Claiming the Loss in ITR:

   • Report the loss under Capital Gains schedule in ITR (ITR-2 or ITR-3 depending on your case).

   • Keep supporting documents like proof of investment, bankruptcy declaration, and proof of loss.

5. Note on Bad Debt:

   • Since NCDs are investments, loss is capital loss, not business loss or bad debt.

   • If you had advanced money as a loan (and not investment), it might be treated differently as bad debt, but not in this case.

Summary:

You can claim the loss on your SREI NCD investment as a capital loss in your income tax return and set off or carry forward as per capital gains rules.