Can we off-set short term loss from Equity against STCG from debt

Income Tax Income from Capital Gains
#1

Hi

Say Debt_STCG is Rs. 5000,
Equity_STCG is (Profit is Rs. 15000 - Loss of Rs. 7000).

Can we do this Net Debt_STCG = Rs. 0 and
Net Equity_STCG = Rs. 13,000?
(the income falls in the 30% tax slab)

i.e. can we adjust loss in equity against gains from debt without adjusting the loss against equity first?

If yes, then we have to reject the P&L statement given by the broker as that will give a net Profit or Loss. We have to make our excel sheet and separate the loss and the profit components.

#2

Hi @S_Gupta

The loss of the same head gets adjusted against the profit of that head and later if remains any profits, then it is adjusted against other income heads.

#3

So, capital Gains is a type of income head: irrespective if equity or debt?

Say Debt_STCG is Rs. 5000,
& Equity_STCG is Rs. 15000 and Equity_ShortTermCapitalLoss is Rs. 7000
So, net Equity_STCG becomes Rs. 8000. (Tax Liability = 30% of 5000 + 15% of 8000 = Rs.2,700)

Can we do this instead:
Net Debt_STCG = Rs. 0 and
Net Equity_STCG = Rs. 13,000?
Now, the Tax Liability becomes only 15% of 13000 = Rs. 1,950

i.e. Rs. 750 lesser tax.

Is it allowed as per Income Tax Rules for a salaried person?

#4

Hi @S_Gupta

  1. Debt_STCG = The tax on Debt Funds held for less than 3 years (Short term) is calculated as per the income tax bracket for that individual.
    Debt_LTCG = The tax rate on Debt Funds held for more than 3 years (Long term) is 20% along with the indexation benefit.

  2. Equity_STCG = The tax rate on Equity Funds held for less than 1 year (Short term) is 15% (STT is paid)
    Equity_LTCG = The tax rate on Equity Funds held for more than 1 year (Long term) is 20%.

For the purpose of Income Tax calculation for a salaried individual, before making any inter-head adjustments, losses should be set off against similar income that is taxable under the same head of income. Therefore, the equity STCG is first set off against equity loss and then if any gains remain, it is set off against debt loss and vice versa.

In your case, the first calculation seems correct.
Equity STCL is first set off against Equity STCG (15000-7000 = 8000)
And Debt STCG is taxable at the slab rate.

Hope this helps.

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