How to Set Off Short-Term and Long-Term Capital Loss?
Capital-loss set-off depends on whether the loss is short-term or long-term. Short-term capital loss has broader set-off treatment than long-term capital loss under the applicable rules.
Quick Answer
Short-term capital loss can generally be set off against eligible short-term or long-term capital gains, while long-term capital loss is generally restricted to long-term capital gains.
Short-Term Capital Loss
A short-term capital loss can generally be set off against both short-term and long-term capital gains, subject to the statutory rules.
Long-Term Capital Loss
A long-term capital loss is generally available for set-off only against long-term capital gains.
Why Correct Classification Matters
The holding period and asset type determine whether a loss is short-term or long-term. An incorrect classification can produce an incorrect set-off.
Carry-Forward of Unabsorbed Loss
Where the law permits, an unabsorbed capital loss can be carried forward subject to the applicable filing and time conditions.
Report the Loss Even If Tax Is Low
A taxpayer should not omit a genuine capital loss merely because it does not reduce current tax immediately. Correct reporting can preserve eligible future set-off.
Important
Set-off rules are subject to statutory conditions. The exact treatment should be checked against the assessment year and type of gain or loss.
Frequently Asked Questions
Can STCL be set off against LTCG?
Generally yes, subject to the applicable statutory provisions.
Can LTCL be set off against STCG?
Generally no. Long-term capital loss is generally restricted to long-term capital gains.
Can capital losses be carried forward?
Eligible capital losses can be carried forward subject to the applicable conditions, including filing requirements.
Related EZTax Resources
- What Is Capital Gain in Income Tax?
- What Is Short-Term and Long-Term Capital Gain?
- How to Calculate Capital Gain From Shares?
- How to Report Capital Loss in ITR?
- Which ITR Form Should I Use for Capital Gains?
- Does AIS Show Capital Gains?
Official Sources
For current capital-gains and ITR guidance, refer to the Income Tax Department resources for the relevant assessment year.
Income Tax Department — ITR-2 FAQ
Income Tax Department — Set-off / Carry-forward of Losses FAQ
