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SET-OFF OF LT CAPITAL LOSS ON EQUITY SHARES

(Guest)

FOR ASSESSMENT YEAR 2010-2011, AN ASSESSEE IS HAVING LONG TERM LOSS OF 10 LAKHS FROM SALE OF LISTED EQUITY SHARES & LONG TERM GAIN OF 1 LAKH FROM SALE OF LAND UNDER THE HEAD 'CAPITAL GAINS'.

CAN THE ABOVESAID GAIN BE ADJUSTED AGAINST THE LOSS WHICH IS ARISING FROM AN EXEMPTED SOURCE?

CAN THE BALANCE LOSS OR THE WHOLE LOSS BE CARRIED FORWARD TO THE NEXT YEAR WHEN THE AVAILABILITY OF EXEMPTION U/S 10(38) ITSELF IS UNCERTAIN?

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11 Replies

praveen (Chartered Accountant) (6971 Points)
Replied 20 August 2010

yes you can set off the losses and also carry forward the losses if the returns are filed in time. It returns are not filed within the due date you cannot carry forward the losses.

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 20 August 2010

Since gain on sale of shares on exchange is exempt u/s 10(38) loss on sale of same cannot be used to set off any gain from any other source nor can be carried forward from to be set off against future profit / gains.

If the loss is on sale of shares other than on exchange then the loss can be set off against gain from land and balance be carried forward if return is filed on time, otherwise not.

2 Like

Mangesh (Chartered Accountant) (50 Points)
Replied 20 August 2010

Assessee can transfer these shares to any other family member, who can sell these shares in market (not on stock exchange) so that it will not be exempted u/s 10(38) and asseessee can avail benifit of LTCL if clubing provisions are applied.

Dheeraj (Learner) (1100 Points)
Replied 21 August 2010

AS PER MY OPINION

THE GAIN WILL BE CHARGED & U CAN NOT SET OFF IT AGAINST THE LOSS ON SHARES AS PER SECTION 10(38)

& AS PER ABOVE SUGGESTION U CAN NOT SOLD THE SHARES TO FAMILY MEMBERS WITH INADEQUATE CONSIDERATION

OTHERWISE IT WILL AGAIN CLUBBED TO UR INCOME

THEREFORE, U HAVE TO PAY TAX ON LTCG ON LAND

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 21 August 2010

Also one thing to add the transaction for sale has already been done and so now cannot be transferred to any other person as of now i. e. backdating not possible as already sale has taken place and loss has been booked.

If the transaction had been occuring now some planning like transferring the shares at the closing market rate could be done and long term loss be booked other than on which STT paid and subsequently be sold by that person.

But the transaction has already taken place. So no planning possible now.

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 21 August 2010

DEAR FRIENDS

U CANNOT SET OFF THE CAPITAL LOSS ARISING ON SALE OF LISTED EQUITY SHARES AGAINST THE OTHE CAPITAL GAIN ARISING OUT OF SALE OF ANY OTHER ASSET.

LONG TERM CAPITAL GAIN IS EXPEMPT U/S 10(38) OF THE INCOME TAX ACT AND THUS IF THE LONG TERM CAPITAL LOSS IS INCURRED FROM SALE OF LISTED EQUITY SHAREES, THE GAIN OF WHICH EXEMPT U/S 10(38), U CANNOT TAKE THE SET OFF OF SUCH LOSS AGAINST ANY OTHER CHARGEABLE LONG TERM CAPITAL GAIN. FURTHER, U ALSO CANNOT CARRY FORWARD THE LONG TERM CAPITAL LOSS AS NOTED ABOVE.

REGARDS,

MANOJ

CA LOVELY ARORA (C.A. B.Com (H) Graduate) (2151 Points)
Replied 21 August 2010

long term loss/gain from sale of shares is an exempt loss/income u/s 10(38)....... so it cann't be setoff from the income under other heads (Taxable Income)......