Q) I have incurred a long term loss on the sale of listed equity shares of Rs 40,000 during the FY 2018-19. I also have short term capital gains from liquid mutual funds of Rs 20,000. Can I set off the long term loss against the short term capital gain and pay tax on the net amount? I also have a house property income of Rs 4 lakh a year.

A) Long term capital loss can be set off only against long term capital gains. Hence, you cannot set off the long term loss of Rs 40,000 against the short term gain of Rs 20,000. While filing your income tax return, you have to pay tax on the entire short term capital gain of Rs 20,000 along with your house property income.

You have to also report the long term capital loss of Rs 40,000 in your income tax return. You will be entitled to carry forward the long term loss for 8 successive years and are entitled to reduce the same against any long term capital gain in the future 8 successive years.

The query is answered by Archit Gupta, Founder and CEO, ClearTax