Capital loss for surcharge purchase?

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68 Points Joined November 2021

If I have a gross income of 1.05 crore, which includes 1 lakh LTCG, does it make sense to book long term capital loss of 6 lakh to come in the lower bracket for surcharge?

Also, in case you advise to book loss, booking short term capital loss will have the same impact as booking long term captial loss?

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On 22 February 2025 at 16:03 Report
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68 Points Joined November 2021

O sorry for the wrong title. It should be: 

Is it OK to book capital loss for reducing surcharge?

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On 22 February 2025 at 16:05
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Master in Accounts & high court Advocate
9447 Points Joined December 2011

To optimize your tax liability, let's analyze the situation. Current Tax Situation 1. _Gross Income_: ₹1.05 crore 2. _LTCG_: ₹1 lakh 3. _Taxable Income_: ₹1.05 crore (assuming no other deductions or exemptions) 4. _Surcharge_: Applicable, as the income exceeds ₹1 crore Proposed Strategy 1. _Book Long Term Capital Loss (LTCL)_: ₹6 lakh 2. _Adjusted Taxable Income_: ₹99 lakh (₹1.05 crore - ₹6 lakh LTCL) 3. _Reduced Surcharge_: By bringing the taxable income below ₹1 crore, you may avoid or reduce the surcharge. Impact of Booking LTCL 1. _Tax Savings_: By reducing the taxable income, you may save on taxes, including the surcharge. 2. _Surcharge Benefit_: If the adjusted taxable income is below ₹1 crore, you may avoid the surcharge or be eligible for a lower surcharge rate. Short Term Capital Loss (STCL) vs. LTCL 1. _STCL_: Can be set off against both STCG and LTCL, but the set-off is limited to ₹1 lakh in a financial year. 2. _LTCL_: Can be set off only against LTCL, and there is no limit on the set-off amount. In your case, booking LTCL might be more beneficial, as you can set off the entire ₹6 lakh loss against your LTCG. However, if you have STCG, booking STCL might be more advantageous. Conclusion Booking LTCL of ₹6 lakh can help reduce your taxable income and potentially lower your surcharge liability. However, consider the following: 1. _Verify tax implications_: Consult a tax professional to ensure this strategy aligns with your overall tax situation and doesn't trigger any adverse consequences. 2. _Evaluate investment implications_: Consider the impact of booking a loss on your investment portfolio and future investment decisions. 3. _Documentation and compliance_: Ensure you maintain proper documentation and comply with all tax regulations when booking the loss. It's essential to consult a tax professional to determine the best course of action for your specific situation.

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On 22 February 2025 at 16:06


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