Carry forward of Losses and Setting off in LTCG

Income Tax Income from Capital Gains
1

Hi,

I have a situation where I need to set-off LTCG losses. For example LTCG is exempted till 1.25 lakhs for the current year after which I have to pay tax of 12.5%.
Now let’s say I have a profit of 1.3 lakhs of LTCG and also I have a loss of 20000 under LTCG as well.

My question is as follows :

  1. If I set-off Rs 5000 from 1.3 lakhs I get 1.25 lakhs and hence I get tax exemption. Is my understanding correct?
  2. Now I have remaining Rs 15000. Do I need to subtract from Rs 1.25 lakhs again or can I carry forward this to next year? Will that be valid scenario?

Please do let me know if some more clarity is required on my question

2

Also an addition to my above question :

Do I mandatorily need to state current year losses while filing ITR? Let’s say while filing previous year ITR I had forgotten to add loss. Can I add that loss as Brought forward and use it to set off against income ?

3

@enigma

No, you cannot brought forward such losses and set off them against current year income in case the same were not disclosed in the ITR of the last year, even if you claim them the same would be disallowed during ITR processing.

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4

Thanks

But what about the original query. Any idea about that? Can you please let me know on that as well.

5

Hey @enigma ,

Here’s how the computation works based on your situation:

  1. Current year losses will be the first thing which will be set off against your current year income. Therefore, your ₹20,000 loss will first reduce your ₹1.3 lakh gain.

  2. This leaves you with a net gain of ₹1.1 lakh, which is completely exempt from tax as per the ₹1.25 lakh exemption limit under Section 112A.

  3. Since your losses have already been adjusted, there’s nothing left to carry forward to the next year.

So, your gains are tax-free for this year, but the losses can’t be carried forward as they’ve been fully utilized.

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