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Setting off Capital Gains against each other

Anmol Gupta

There are two parts to this article.

  • What is considered as Short term and Long term capital gain/loss?
  • What all can be set off against each other?

Short Term Capital Gain (STCG) and Long Term Capital Gain (LTCG)

A capital asset held for less than 36 months before sale is considered as short term capital asset. For stock or other securities listed in recognized stock market, units of equity oriented mutual funds, zero coupon bonds and units of UTI - the short term is considered as 12 months. Long term is what short term is not i.e. more than 3 years and more than 1 year respectively for the instruments mentioned above.

Rules for Setting Off and Carry forward of losses.

Whoever makes capital loss on their investments i.e. selling their asset at a lesser price than their purchase price, are allowed to carry forward the loss for eight years from the date of loss. Rules are as follows:

  1. Short Term Capital Loss can be set off against the gains from sale of Long Term or Short Term asset.
  2. Long Term Capital Loss can be set off only against the gains from the sale of Long Term assets.
  3. Capital loss can only be set off against capital gains and not any other kind of income. Eg. You can not set off your capital loss against your salary.

Originally published on Quora.

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About the Author
Anmol Gupta
Anmol is CEO at 7Prosper. He is SEBI Registered Investment Adviser, with expertise in Finance and Technology domains. Anmol is committed to help people achieve their financial freedom.

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