Can I offset long-term capital gains (LTCG) with losses from the previous year?

I have incurred long-term capital losses from last year that are eligible to be offset against long-term capital gains from this year. During the current financial year, I have made some long-term capital gains as well as some long-term capital losses, resulting in the final item being a net capital loss. Is it permissible to set off the long-term capital gain for this year against the carryforward of the long-term capital loss incurred in the previous eight years (without adjusting the long-term capital loss for that year) and carry forward the long-term capital loss in that year for the next eight years?

To illustrate with an example. Long term capital loss (AY- 2024-2025) – 20,000 For AY (25-26)

Long-term capital gain – PLN 60,000

Long term capital loss – 1,00,000.

Can I run it long-term capital gains With ₹60,000 to cover my loss of AY 24-25 from the previous year and carry forward this year’s long term capital loss of ₹1,00,000 for the next few years?

Section 70 allows a loss from any source within the same head of income to be set off against income from any other source within the same head. This is subject to certain exceptions where a loss from that particular source cannot be set off against another source of the same value during the year and must be carried forward to the following year to be set off against income from the same source. For example, a speculative loss under the heading “Profits and gains from a business or profession” can only be set off against speculative profits earned in the same year and subsequent years.

Long-term capital gains and losses

Similarly, Art. 71 allows net losses in one item of income to be set off against income in another item, with certain exceptions. Any uncovered loss may be carried forward to the next year. Such carryover is only permitted for eight years following the year in which the loss was first incurred.

Therefore, first you need to calculate the profits or losses of the current year after the entry into force of Art. 70 of the Act. After taking into account the effect of cross-source offsetting of gains and losses, only carried forward losses can be set off against the current year’s remaining profits if the cross-source calculations result in profits. If carried forward, losses may be offset first without effect under the allowable cross-source adjustment; this would defeat the purpose of limiting the number of years to which losses from a given year can be carried forward for offsetting purposes.

Read all our personal finance stories Here

Balwant Jain is a tax and investment expert. He can be reached at [email protected] and @jainbalwant at X.

Disclaimer: The views and recommendations presented above are those of the individual analysts, not of Mint. We advise investors to seek the opinion of certified experts before making any investment decisions.