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How to avoid set off of LTCG against carry forward STCG

Amish (General) (340 Points)

09 September 2021

I had short term loss last year of about 30K. (Brought Forward Loss - BFL)

This year I have STCG (gain) of 3000Rs and also LTCG (equity) of 23K.

Now LTCG equity should be exempt upto 1 Lakh.

But when I am filling income tax return, it is adjusting 3000Rs (STCG) as well as 23K LTCG from BFL of 30K

Which means that now my carried forward loss (CFL) becomes only 4000Rs. But I do not want to adjust 23K (LTCG) because it should be exempt upto 1 Lakh.

How do I make sure that CFL is 27K and not just 4000Rs?

Thank you

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3 Replies

Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (3303 Points)
Replied 09 September 2021

As per the provisions of income tax law, LTCL can be set off against LTCG. Further, STCL can be set off against both short-term capital gains (STCG) and LTCG. ... Any unadjusted loss under the head capital gains, cannot be set off against any other income in the same financial year (FY)

Amish (General) (340 Points)
Replied 09 September 2021

Yes that I know, but what if I do not want to set off STCL against LTCG. But want to carry it forward to next year?

It is "Can be" v/s "will be".

If set off is compulsory set-off then Wording should be:

STCL will be set off against both STCG and LTCG.

"Can be" makes it optional.
"Will be" makes it compulsory.

veerendar singh (tax consultant) (3301 Points)
Replied 09 September 2021

Amish i would suggest you to read the act for clarification. the act neither uses words can be nor will be.

my opinion on the subject matter is:
section 112A does not in effect make 1 lac exempt income. it simply prescribes a tax rate of nil for 1 lac ltcg. exempting an income actually means excluding it from total income. your ltcg will be included in total income and then while computing tax on such total income we will ignore 1 lac and apply 10% rate on remaining ltcg.

hence if ltcg is included in total income then it will be subjected to set off as well. so as per the law it is important to setoff ltcg against st loss.

however there are artfull ways to dodge the provisions of the law. it might be possible to carry forward the loss without adjusting it against ltcg. but this shouldnt be discussed in open forum. i hope u know what i mean.