Can Long Term Capital gain from Equity MF be offset against Long Term Capital losses from Equities?

Hello Folks ,

I want to realise Long term capital loss by selling YES BANK share which I purchased using my NRO trading account with Broker A.

I have some EQUITY Mutual fund positions(Bought directly from Fund houses) using fund from my NRE account and these positions are in Profit.

I’m planning to sell these profitable MF positions to realise Long term capital gains and offset this gain against the Long term capital loss from YES BANK shares.

I’m planning to do this in this financial year itself, so no carry forward of losses.

This is just plan and before doing this, I want to check and confirm if I can do this or not, I’m other words, is my understanding correct to execute my plan?Are there are any catches or anything which I must keep in mind?

Any pointers will be helpful .

Hey Kapil! Here’s the lowdown on your query about offsetting Long Term Capital Gains (LTCG) and Long Term Capital Losses (LTCL) from different equity investments:

Can LTCG from Equity MF be offset against LTCL from Equities?

Yes, LTCG from equity mutual funds and LTC losses from shares (like YES BANK shares) are both considered under Long Term Capital Gains/Losses from Equity Oriented Assets.
Both are treated as capital assets held for more than 12 months (assuming your MF units and shares are held for >12 months).
According to Income Tax Act, LTCG from equity shares and equity-oriented mutual funds are grouped together for set-off and carry forward purposes.
So, you can offset LTCG from your equity mutual funds against LTCL from shares to reduce your taxable capital gains.

Important points to remember:

Equity-oriented classification matters:
- Your MF units should be equity-oriented (typically >65% in equity).
- If they are debt funds or hybrid funds, different rules apply.
Different accounts (NRO vs NRE) and different brokers don’t affect tax treatment:
- Capital gains/losses are on your total income tax return, irrespective of which account or broker.
Tax rates & exemptions:
- LTCG on equity above ₹1 lakh in a financial year is taxed at 10% without indexation.
- Set-off reduces your taxable gains, so good strategy.
Timing:
- You can do the sale of loss-making shares and profitable MFs within the same financial year for immediate set-off.
- No carry forward required if set-off happens in the same year.

Summary:

Point	Yes / No / Notes
Offset LTCG equity MF with LTCL equity shares	Yes
Different accounts (NRE/NRO) affect set-off	No
Equity-oriented MF required	Yes
Offset in same FY for no carry forward	Yes, possible
Tax rate on LTCG (equity)	10% on gains above ₹1 lakh

Any catches?

Ensure correct holding period for long-term classification.
Maintain proper documentation for all transactions.
Note that losses from equity-oriented assets cannot be set off against other income heads (e.g., salary).
Beware of STCG and STCL, they are treated differently.