I have brought forward last year’s long-term capital loss, which is eligible for offset against the current year’s long-term capital gains. During the current financial year, I have recorded some long-term capital gains as well as some long-term capital losses, with the result that the ending position is a net capital loss. Is it allowed to offset this year’s long-term capital loss against the put forward long-term capital loss of the previous eight years (without adjusting this year’s long-term capital loss) and carry forward the long-term capital loss? capital loss this year for the next eight years?
To illustrate with an example. Long term capital loss (AY- 2024-2025) – 20,000 For AY (25-26)
Long-term added value – 60,000
Long term capital loss – 1,00,000.
Can I get the long-term capital gains by ₹60,000 against last year’s loss of AY 24-25 and bear this year’s long-term capital loss of ₹1,00,000 to the following years?
Article 70 allows the set-off of losses from any source falling under the same head of income against income from other sources falling under the same head of income. There are certain exceptions to this where the loss from that particular source during the year cannot be set off against any other source of the same head and has to be carried forward to a subsequent year to be set off against income from the same source. For example, speculative losses under the heading ‘Profits and profits from business or profession’ can only be offset against speculative profits during the same year and subsequent years.
Long-term capital gains and losses
Similarly, Section 71 permits the set-off of net losses under one income item against income under the other income item, with certain exceptions. Any unabsorbed loss can be carried forward to the following year. Such transfer is only permitted for eight years immediately following the year in which the loss was first suffered.
So first the profits or losses of the current year have to be calculated after Article 70 of the Act comes into force. Once the impact of the inter-source calculation of profits and losses has been made, only the losses carried forward can be offset against the remaining profits of the current year if the inter-source calculation produces a profit. When losses are brought forward, they may first be offset, without any allowable adjustment between sources; it will defeat the purpose of limiting the number of years to which losses from a given year can be carried forward for settlement.
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Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and @jainbalwant on his X handle.
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