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Set off and carry forward of Long Term Cap loss from sale of equity shares

06 October 2018

Can someone clarify stating some sections where long term capital loss from sale of equity shares by paying STT to recognised stock exchange can be carried forward or lapses in the same year.

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14 Replies

Radhika Ajmera (CA IN practice) (163 Points)
Replied 07 October 2018

there is no provision to carry forward of long term capital loss it will be lapse in current year
when long term capital gain is exempt from tax then long term capital loss is not available to c/f for tax purpose...if I am not wrong

Long Term Capital Gain on transfer of shares and securities covered under Security Transaction Tax (STT) [Section 10(38)]

Long-term capital gains arising on transfer of securities are not chargeable to tax in the hands of any person, if following conditions are satisfied :

1. The asset transferred should be equity shares of a company or units of an equity oriented mutual fund or a unit of a business trust.

2. The transaction should be liable to securities transaction tax, at the time of transfer.

3. Such asset should be a long-term capital asset.

4. Transfer should have taken place on or after October 1, 2004.

Equity oriented mutual fund means a mutual fund specified under section 10(23D) and 65% of its investible funds, out of total proceeds are invested in equity shares of a domestic company.

Uday Rathi (133 Points)
Replied 07 October 2018

As section 10(38) is abolished with effect from 01.04.2018.
Sec 112A will attract to transfer of equity shares on or after 01.04.2018 which STT is paid.

LTCG Relaxation upto 100k is provided in this section.
Above 100k there would be a flat tax rate of 10%.
In case you incur a loss on transfer of such shares, the loss can be carry forwarded and set off against the gain arising under sec 112A in subsequent years.

manoj (Account Executive) (37 Points)
Replied 13 March 2019

Uday ji- Please suggest section

in case you incur a loss on transfer of such shares, the loss can be carry forwarded and set off against the gain arising under sec 112A in subsequent years.

Read more at: https://www.caclubindia.com/forum/set-off-and-carry-forward-of-long-term-cap-loss-from-sale-of-equity-shares-487602.asp

CA PARAS BAFNA (Practising CA ) (33423 Points)
Replied 25 March 2019

The carry forward and set off of Capital Losses is governed by Section 74.

shilpi (student) (774 Points)
Replied 06 April 2019

If long term capital loss -100000 And in second case if LTCL is 150000.Is there difference in their treatment of carrying forward and set off these losses.I mean to ask is there any limit to set off?

CA PARAS BAFNA (Practising CA ) (33423 Points)
Replied 06 April 2019

There is no difference in carrying forward time limit for both STCL and LTCL. These can be c/fd up to 8 assessment years.

shilpi (student) (774 Points)
Replied 06 April 2019

Loss equal to or less than 100000 can treated as exempt source of loss?

CA PARAS BAFNA (Practising CA ) (33423 Points)
Replied 06 April 2019

No, this novel idea has not yet come in the mind of the FM.

If LTC Loss is Rs. 50000/ you can c/fd Rs.50000/-.

Rocks Parss (241 Points)
Replied 28 June 2019

What if during the current year there is long term capital gains on sale of equity shares after grandfathering of Rs 70000 and there is long term capital loss as per the new provisions of Rs 25000, can one carry forward the long term loss of Rs 25000 for future set-off and not pay any tax on gross long term capital gain of Rs 70000 being less than Rs 1 lakh?

Rocks Parss (241 Points)
Replied 28 June 2019

In the scenario where there is brough forward long term loss say from debt mutual funds and the long term capital gain on sale of equity mutual funds after grandfathering is Rs 75000, does the brough forward loss has compulsorily to be adjusted against 75000 and the carried forward losses reduced? or one need not adjust as Rs 75000 is less than threshold of Rs 1 lakh & hence no long term capital gain under 112A?

Rocks Parss (241 Points)
Replied 28 June 2019

A scenario where there is loss on sale of debt mutual funds say of Rs 70000 and there is a long term gain on sale of equity mutual funds of Rs 90000, can the loss on sale of debt mutual funds of Rs 70000 be carried forward and not adjusted and no capital gains tax be payable since LTCG of Rs 90000 is less than Rs 1 lakh? Would the answer differ if the loss on debt mutual funds was short term or long term?

TARUN MANGAL (student) (28 Points)
Replied 26 July 2019

Same query. Plz reply

Suresh Thiyagarajan (Student) (3986 Points)
Replied 28 July 2019

1. We all know that debt MF if it is held for less than 3 years, any gains arising on sale of such units will be considered as short term capital gains and consequently charged to tax.
2. Sale of Equity oriented MF is one of the assets contemplated u/s 112A. If the above MF is held for more than 12 months any gain on the same will be charged to tax as LTCG.
3. Now the real confusion is whether set off and carry forward section comes first or exemption u/s 112A of Rs. 1 lakhs comes first towards the gain u/s 112A...?
4. If we look at this from a logical point of view, only after adjusting all the items under the same source under the head, different sources may be used for set-off. In the given case as per sec 112A gains to the extent of Rs. 1 lakhs will be exempted and no need for payment of tax on the same.
5. Sec 74 deals with set-off of short term capital loss with LTCG. This set off happens only after finding the net tax liability from Long term source. Only then the net amount will be set it off against balance available gain from Long term capital asset.
6. In other words, the net result of one source should be determined and only the balance gain if any should be netted off with other sources in the same head.
7. In the given case net gain from one source u/s 112A should first be computed and balance gain if any can be netted off with STCL.
8. Going by the above logic net gain comes to Nil ( Rs. 90,000 < Rs. 1,00,000) and there is no gain available for set-off of STCL of Rs. 70,000. Hence Rs. 70,000 should be carry forwarded for future years as STCL.
9. In the given case if the debt MF is long term it will be covered u/s 112 and not sec 112A. Then, in that case, LTCL of Rs. 70,000 will be carry forwarded.
Please correct me if the above interpretation has an alternative view.

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Rocks Parss (241 Points)
Replied 05 September 2021

Guess the portal is not allowing as for the intra head capital gains and losses of a particular year are adjusted interse automatically.. Also does the section also say so?