Regarding capital losses

623 views

Save Share

Rajkumar

Engineer

46 Points Posted on 26 July 2013

Hi,

I have incurred a capital losses of around 30,000/- for the FY 2012-13. When I entered these details in the ITR-2 excel sheet, these losses have been shown as being carry forward to future.

At the same time, I have to pay an extra tax of around some 4000/- plus because of an additional income of 20,000/- plus which was not accounted in Form-16. So, in summary ITR-2 is asking me to pay extra tax of 4K plus and carry forward losses of 30K.

Now, my question is why don't the ITR-2 form deduct the taxable income by 30,000/- and re-calculate the tax to be paid. Is there something I need to do for it to happen? Or, these both are independent?

Ideally, I'd expect the losses (30,000/-) should be deducted from the total taxable income and hence in this case, I'd get some tax refund for the amount of 10,000/-, which is much better than paying tax now for 20,000/- and carrying forward 30,000/- losses.

Why so much of these complications of carrying forward etc?

Let me know of how to deal with this situation in the best possible manner.

Thanks,

Replies (5)

varun

article assistant

86 Points Posted on 26 July 2013

capital loss can be set off only on capitals gains. u cannot deduct it from taxable income

short term capital loss can be set of on both long term and short term capital gain but long term capital loss can be set off only against long term capital gain

u can carry forward the capital loss upto 8 years. with in that 8 year if u transfer any capital asset and got capital gain means u can set off that capital loss with this capital gain.

Rajkumar

Engineer

46 Points Posted on 26 July 2013

Hello Varun,

Thank you very much for your clarification. Just a couple of follow-up questions:

1. What happens to the carry forward losses (CFL), if I don't get any capital gains in the next 8 years? For example, I have got the losses because of the sharess given by my previous employer. Now, my current employer doesn't award any shares. And I believe not every employer would give the shares.

2. If we delay paying the tax, govt. will recover interest on the tax as well as fine for delaying the payment as well. Similar to this, would the interest be considered on CFL during the tax calculations in case of capital gains during future years? If yes, then only rules are fair enough. If no, rules are unfair.

Thanks,