I have losses in F&O in the last financial year. Can I use these losses to set-off my other incomes? I also missed reporting losses for FY 22-23 as I did not file an ITR. Can I report them now and set them off?
Losses from trading, if reported timely within the due date, can be used to set off your other incomes and can also be carried forward to future years.
For example, say you have short-term capital gains of ₹2L and face a loss of ₹3L from F&O. You can offset this loss against your capital gains, reducing your net taxable gains to zero. The remaining losses of ₹1L will be carried forward to the next year.
However, not all losses can be set off against all profits. There are some rules and restrictions:
- Your F&O losses can be set off against all incomes (except salary) in the current FY. Once carried forward, they can only be set off against either F&O or intraday trading profits.
- Intraday trading losses can only be set off against intraday gains both in the current and subsequent years.
- Short-term losses from delivery-based trading can be set off against other short-term and long-term capital gains.
- Long-term capital losses can only be set off against long-term capital gains.
Here’s a table that summarizes it all.
But, here’s something you should remember:
In order to carry forward your losses, you must file your ITR before the due date, which is 31st July of the relevant assessment year.
How to Calculate Turnover for F&O Trading 2024
For F&O trading, turnover is calculated as the sum of absolute values of profits and losses. So, you’ll just have to add all the profit and loss without taking the negative sign into consideration.
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@Surbhi_Pal can I offset F&O losses against long term capital gains in current year
Hey @Walker,
Yes, you can.
Let’s assume I am having Rs.4,00,000/- FnO losses being carried forwarded in next year after the ITR filing in current year (for FY23-24, or for AY24-25). Now, if I redeem mutual funds and I also have capital gains of Rs.4,00,000/-, then can I set off this entire 4L capital gain in next year ITR (for FY24-25, or for AY25-26) against the 4L FnO losses which are being brought forward from previous years?
Hey @vaibhavshah,
Brought forward F&O losses can be set off against business income only. So you won’t be able to set off your carry forward f&o losses of current year against capital gains in the next year.
Hope this helps!
Thank you, Bharti @Bharti_Vasvani , for providing the clarification.
Yes, you are right. I was just trying out practically to fill a dummy ITR-3 form (without submitting it, of course), and I noticed that current year Business Loss (or F&O loss) is automatically set-off against current year Capital Gain (and other income such as Savings Account Interest etc) in the Schedule CYLA. However, despite bringing forward the previous year losses from the Schedule CFL, they are not set off in the Schedule BFLA against the remaining Capital Gain of the current year.
Thank you once again for prompt confirmation. Much appreciated.
Hello @Sakshi_Jain,
From an income tax perspective, can short-term capital losses on mutual funds and stocks be carried forward to the next financial year in the same way as business losses?
and also
Can I offset my trading profit (which is a business income) by the losses on stocks and mutual funds bought in current financial year?
Hello @sachinsp15
Capital Gain losses if cannot be fully set off in the current year can be carried forward for a period of up to 4 years. Moreover, capital gains losses cannot be set off against any other income even in the current year.
Therefore, your trading profit needs to be disclosed as Income in the ITR for AY: 2025-26 and the Capital losses (Short Term) can be carried forward for set off in subsequent years provided the ITR is filed in timely manner. Hope this clarifies! For more clarifications, you may get in touch with me on Instagram @FinTaxSnippets.
Thanks,
CA. Pulkit Garg
Hi @garg.pulkit131 ,
Thank you for your response. My question about offsetting capital losses with trading profits (business income) is based on the following post from a Quicko representative:
If capital gains can be considered as business income, then it should follow that capital losses for this financial year can be used to offset against trading business income, correct?
Hi @sachinsp15
Yes, that’s correct. If the income from trading of shares is considered as Business Income rather than Capital Gains then any losses can be set-off against other Business Income in the current year and the remaining losses if any which cannot be set off can be carried forward to subsequent years for set-off. Hope this clarifies your concerns.
Thanks,
CA. Pulkit Garg
Hi @sachinsp15,
Yes, losses from stocks and MFs can be carried forward for up to 8 years.
No, capital losses can’t be adjusted against incomes other than capital gains. There as well, STCG can be adjusted against both STCG and LTCG whereas LTCG can only be adjusted against LTCG.