Tax guidelines for setting off long-term capital loss from numerous debt funds

I’ve made capital beneficial properties of about 19 lakhs by promoting numerous debt mutual funds which I held for greater than 3 years. Approximate capital beneficial properties after indexation is about 3+ lakhs. In one fund which is traded within the US, I’ve a capital loss after conserving it for greater than 5 years. Is it attainable to set off this capital loss towards the capital beneficial properties which I’ve made? And if that’s the case how is the loss calculated, is it with indexation or with out indexation?

As per the earnings tax provision, a taxpayer is allowed to set off losses of the present yr beneath the earnings beneath the identical head in addition to towards sure different heads. Since the debt funds and the US funds have been offered after having been held for greater than three years, the beneficial properties and losses are handled as long-term. No distinction is made between capital property based mostly on the nation of investments in debt funds. The taxpayer is allowed to set off his long-term loss towards the long-term capital beneficial properties for a similar monetary yr and has to pay tax solely on the steadiness of long-term capital acquire. The investments which have develop into long-term are eligible for indexation advantages besides investments made in listed shares and equity-oriented schemes.

So you possibly can set off the long-term loss in respect of US funds towards long-term capital beneficial properties in respect of different debt funds. In case the setting off ends in internet long-term capital loss for the yr the identical can’t be adjusted towards short-term capital beneficial properties for a similar monetary yr. The internet long-term capital loss for the yr additionally can’t be set off towards earnings from different sources of the identical yr and needs to be carried ahead for set off towards long-term capital beneficial properties in eight subsequent years.

In respect of investments made, after 31 st March 2023, in mutual fund schemes with home fairness funding doesn’t exceed 35% the earnings are to be handled as short-term capital beneficial properties regardless of holding interval and might be taxed at your slab fee.

Balwant Jain is a tax and funding knowledgeable and may be reached on [email protected] and @jainbalwant on his Twitter deal with.

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Updated: 21 Jun 2023, 09:09 AM IST