Key Takeaways
- STCL can offset both STCG and LTCG in the same year — highly flexible.
- LTCL can only offset LTCG — cannot be used against STCG or salary income.
- Both carry forward for up to 8 years if your ITR is filed on time.
- File your ITR before the due date (July 31 for most salaried individuals) to preserve carry-forward rights.
- Engage a CA if your portfolio has significant losses and gains across multiple asset classes — optimal set-off can save substantial tax.
Introduction
If 2022 or any volatile year dented your portfolio, here is the silver lining: those losses can legally reduce your tax bill — for up to 8 years. Capital loss set-off is one of the most underused tax tools in India.
| Loss Type | Can Be Set Off Against | Carry-Forward Period |
|---|---|---|
| Short Term Capital Loss (STCL) | STCG and LTCG — any capital asset class | Up to 8 assessment years |
| Long Term Capital Loss (LTCL) | LTCG only — cannot offset STCG | Up to 8 assessment years |
| Speculative (F&O) Loss | Only speculative income | Up to 4 assessment years |
A Real Example
FY 2026-27: You have ₹3 lakh LTCG from equity funds. After the ₹1.25 lakh exemption, ₹1.75 lakh is taxable. You also have ₹80,000 LTCL from unlisted shares. Taxable LTCG after set-off: ₹1.75 lakh – ₹80,000 = ₹95,000. Tax at 12.5% = ₹11,875 instead of ₹21,875. Net saving: ₹10,000 (illustrative only).
The Must-Remember Rules
Capital losses can only be carried forward if your ITR is filed on time — before the due date. A late ITR forfeits carry-forward rights permanently. Losses cannot be set off against salary or business income (with specific exceptions for F&O treated as business). Within a year, STCL can offset both STCG and LTCG; LTCL can only offset LTCG.
Disclaimer
Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing. Past performance is not indicative of future results. Baid Inbest LLP is an AMFI-registered Mutual Fund Distributor (ARN: 86114). This content is for educational purposes only and does not constitute personalised investment advice. Consult a Chartered Accountant for your specific set-off calculation.
Capital losses in your portfolio? Plan smart with Inbest — visit www.inbestnow.com or call +91 9903921999.
