Personal Finance

Tax Query: How to calculate capital gains tax set off and carry forward loss

Sanjiv Chaudhary | Updated on September 25, 2021

For FY 2020-21 income tax returns, I have to report under the head capital gain/loss: (a) Sale of domestic debt mutual funds - short term capital gain of ₹14,892, long term capital gain with indexation of ₹1,30,250 (b) Sale of domestic equity mutual funds - long term capital gain of ₹31,044, long term capital loss of ₹99,509 (c) Sale of foreign non-equity mutual funds – short term capital loss of ₹1,21,630 (d) Sale of domestic unlisted equity shares - long term capital loss of ₹31,635. Kindly explain to me the computation of capital gains tax set off and carry forward loss as applicable.

Srishyla Melkote V

I understand that the capital gain / loss as mentioned in your query above, has been calculated after taking into account the appropriate provisions of the Income-tax Act, 1961 (‘Act’). As per the provisions of Section 71 of the Act, losses under head capital gains can be set-off against income under the head capital gains only. Further, as per the provisions of Section 70 of Act, short-term capital loss can be set off against long-term or short-term capital gain. However, long-term capital loss can be set off only against long-term capital gains. Please find below computation of income chargeable under the head capital gains.

Further, as per the provisions of Section 74 of the Act, loss under the head capital gains to the extent not set off in the FY can be carried forward to eight years immediately succeeding the year in which such loss is incurred. Carried forward short-term capital loss can be set off against long-term or short-term capital gain. However, carried forward long-term capital loss can be set off only against long-term capital gains. In the instant case, you have net short-term capital loss which can be carried forward to eight years i.e. upto FY 2028-29 to be set off against short-term or long-term capital gain, for those years. Further, it is pertinent to note that capital loss can be carried forward only if the return of income for the concerned subject year is furnished on or before the due date of filing of original tax return under section 139(1) of the Act. The extended due date, as of now, for filing the income tax return for FY 2020-21 is 30 September 2021 (for cases where no audit is required to be done under provisions of section 44AB of the Act).

I am working in a private company and fall under 20 per cent slab. I own a small quantity of shares in 30 odd companies and received ₹12500 as dividends. What will be the tax implication?

V. Ganesa Moorthy

Finance Act 2020 has shifted the taxability on dividend income from the hands of the company declaring the dividend to the individual investors. The taxability of dividend and tax rate thereon depends upon factors like residential status of the shareholders, nature of activities of shareholder (whether dealing in securities, salaried individual, etc. to determine nature/ head of income). In case of a non-resident shareholder, taxability of dividend income / tax rates are to be seen in light of the provisions of respective Double Taxation Avoidance Agreements (DTAAs), if applicable. Since, you are a salaried employee and are not engaged in dealing with securities, the dividend income would be considered as “Income under the head other sources”. Further, assuming you would qualify as a resident in India, dividend income received shall be subject to tax at the rates applicable you i.e. 20 per cent (plus health and education cess at 4 per cent).

The writer is a practising chartered accountant

Send your queries to taxtalk@thehindu.co.in

Published on September 25, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.

You May Also Like