Set off and carry forward of losses means adjusting the losses against the profit or income of that particular year. Losses that are not set off against income in the same year can be carried forward to the subsequent years for setting off against income of those years. A set-off could be an intra-head set-off or an inter-head set-off.

Following is a table showing how current year losses from each head will be set off with current year income or income from the subsequent years, from the same head or different heads:

Current Year Losses that can be Set off against Current Year Income

Particulars	Salary	House Property	Non-Speculative Business	Speculative Business	LTCG	STCG	Owning And Maintaining Race Horses	Other Sources of Income
House Property Loss	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Non-Speculative Business loss	No	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Speculative Business Loss	No	No	No	Yes	No	No	No	No
Long-Term Capital Loss	No	No	No	No	Yes	No	No	No
Short-Term Capital Loss	No	No	No	No	Yes	Yes	No	No
Loss From Owning And Maintaining Race Horses	No	No	No	No	No	No	Yes	No

 

Speculative Business-

It means a transaction in which a contract for the purchase or sale of any commodity including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity scripts.

 

Non-Speculative Business –This includes:

• Trading on delivery (Main activity of business is trading in shares & stocks)
• Trading in index and stock derivatives
• Trading in agricultural derivatives
• Trading in derivatives through recognised stock exchange
• Forward contract
• Hedging contract in respect of raw materials or merchandise or stocks and shares.
• Trading in commodity derivatives through recognised association which is chargeable to Commodity transaction tax (CTT).
• Agricultural commodities will be considered as non-speculative, irrespective of payment of CTT
• Trading in index and stock derivatives' income or loss will not be considered as speculative but as Gain or loss from Business/ Profession.

Capital Gain / Loss-

In the below financial investment transactions Capital Gain or loss may occur:

• Sale of Mutual Funds (Equity, debt, hybrid)  
• Sale of Shares & stocks (not the main activity of business)

Other points to remember:

Can Annual fee be claimed as an expense while claiming capital gain or loss? Can Equity ETF (Exchange Traded Fund) loss be set off with Equity or Equity funds?

Yes!  provided PMS fee paid is directly attributable to the short term capital gain that you have earned during the year Equity ETF's are invested in the Equity instruments. So loss from ETF can be set off with Equity or Equity funds. Further brokerage and STT can be claimed as an admissible expense but ETT, stamp duty charges and GST cannot be claimed as expenses. 

Can ELSS be taxed at the time of redemption?

Yes. It will be taxed @ 10% if in case LTCG crosses Rs.1 lakh in a financial year.

But from AY 20-21, Companies while paying dividend will deduct TDS @ 10% if dividend is in excess of Rs. 10,000 and it will taxable in the hands of the recipient based on his/her Income.

To know more, connect with an advisor at cPROFIT.