Your Taxes

VN Menon had the following queries

In computing short-term capital gain for AY 2019-20 (through STP from liquid fund/redemption of units of arbitrage scheme), can the price prevailing on January 31, 2018, be taken as the cost, or should the actual cost of investment done prior to that date be taken?

The amendments made to the Income tax Act vide the Finance Act, 2018, for grandfathering of capital gains are applicable only for long-term capital gains.

Accordingly, the same does not apply to gains arising from transfer of short-term capital asset.

The cost of acquisition for short-term capital assets shall be the actual cost of investment as of the date of purchase and not the price prevailing on January 31, 2018.

Can carried-forward long-term loss on sale of property be set off against short-term capital gain from STP/redemption of units of a mutual fund or sale of shares?

As per the provisions of the I-T Act, long-term capital loss cannot be set off against any income other than long-term capital gain.

Accordingly, you will not be able to adjust carried-forward long-term capital loss from sale of property against short-term capital gain.

Can carried-forward long-term loss on sale of property be set off against long-term gain from sale of shares or redemption of units of an MF.

Can the benefit of exemption of LT gain of up to ₹1 lakh be utilised first before setting of long-term carried-forward loss?

Long-term capital loss cannot be set off against any income other than income from long-term capital gain. The regulations do not distinguish between the types of capital assets, sales of which result in a loss/gain situation. Accordingly, the carried-forward long-term capital loss from the sale of property can be adjusted against long-term capital gains arising from the sale of units of mutual funds.

However, it may be noted that the tax return of the year in which the loss was incurred must have been filed within the stipulated due date to carry forward of the loss.

Further, the benefit of exemption of ₹1 lakhshall be considered before setting off the carried-forward losses of previous years.

The writer is Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in

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