Your taxes

I had purchased some shares from the BSE three years back. I sold these at a loss during 2013-14. In the same fiscal, I purchased other shares, which I sold at a profit in the same year. Can I adjust the long-term capital loss with the short-term capital gain during FY2013-14?

KVR Pillai

As per income-tax provisions, an equity share is considered a long-term asset if held for more than a year. Further, any long-term capital gain or loss arising from the sale of an equity share will not be a part of total income if the sale of such shares was made after October 1, 2004, and Security Transaction Tax (STT) has been paid on such sale.

Please note that Long-Term Capital Loss (LTCL) (other than the loss as stated above, that is, LTCL on sale of equity shares on which STT is paid) can only be adjusted against a Long-Term Capital Gain (LTCG).

I understand that you sold equity shares on the stock exchange in FY2013-14, after holding them for three years and STT was paid on the sale transaction. Hence, the loss derived on such sale shall not be part of your total income and, hence, cannot be adjusted with the short-term capital gains earned by you during FY2013-14.

You may also note that since the said LTCL is not part of your total income, it cannot be carried forward to future years for set-off against LTCG of those years.