Taxability of Capital Gains on transfer of Listed Shares and Equity Mutual Funds is always be the favourite topic for all the professionals. But most of the professionals still got confused at the time of giving effect for Capital Loss arising from Listed securities and Equity Mutual Funds. Hence, today I will discuss about Capital Loss in case of Listed Shares and Equity Mutual Funds.
Short Term Capital Loss arising from transfer of Shares and Mutual Funds can be set off against both i.e Short Term Capital Gains as well as Long term Capital Gains.
This is the most crucial concern for all the investor as well as the professional who are giving taxation impact for such transactions.
Till 31st March, 2018, any Long Term Capital Loss arising from sell of listed shares or equity mutual fund is considered as “Dead Loss”. This is mainly because, long term capital losses were not allowed to be set off or carried forward on sale of listed equity shares and equity MF units as the capital gains arising from these were tax exempt u/s 10(38). As per income tax law, capital losses cannot be derived or set off from exempt income.
But Finance Act, 2018, make an amendment in Section 10(38) i.e. Long Term Capital Gains on Listed shares or Equity MF realised after 31.3.2018 by an individual will remain tax exempt only up to Rs 1 lakh per annum i.e. the as per new provision 10% would be levied on Long Term Capital Gains of an individual exceeding Rs 1 lakh in one fiscal year. For example, if your LTCG is Rs 1,50,000 in FY 2020-21 then 10% will be levied on Rs 50,000 as Long Term Capital Gains.
Hence, Now with effect from 01 April, 2018, these listed securities and equity mutual funds are no more tax exempt under Income Tax Act. Hence, any Long Term Capital Loss arising from such listed shares or equity Mutual funds will not be called as Dead Loss but allowed to be set off against this Long Term Capital Gains calculated u/s 10(38) even now if the loss is more than that capital gains then they are allowed to carry forward it to next year upto 8 Assessment Years.
|Capital Loss||Set-Off||Carry Forward|
|Short Term||Short Term Capital Gains or
Long Term Capital Gains
|Upto 8 Assessment Years|
|Long Term||Long Term Capital Gains u/s 10(38)||Upto 8 Assessment Years|
I hope this article is help you to solve your doubts regarding capital loss arising from listed shares or equity mutual funds
The author is a practising CA based at Indore (MP) and can be contacted at firstname.lastname@example.org.
(Republished with Amendments by Team Taxguru)