How the short-term capital loss can be offset by the capital gain regardless of the STT paid; questions answered here

Section 70 (2) of the Income Tax Act provides that short-term capital loss (STCL) can be offset by short-term capital gain. (Image: Reuters)

I recently suffered a short term capital loss on the sale of shares, on which STT was paid. I also have short term capital gains on the sale of stocks on which no STT has been paid. Can the short-term capital loss resulting from the sale of shares on which STT has been paid be offset by a short-term capital gain resulting from the sale of shares on which STT has not been paid?
– Ashish Chopra
Section 70 (2) of the Income Tax Act provides that short-term capital loss (STCL) can be offset by short-term capital gain (STCG). This section makes no distinction between loss compensation on which STT has been paid or unpaid. STCL can be compensated by STCG where the two digits are obtained by a similar calculation. Whether or not the STT is paid is relevant when calculating the tax payable under Section 111A. However, Section 111A is intended for calculating tax payable and not for compensation for losses, which must be done before calculating tax payable. Thus, the STCL on which the STT was paid can be compensated by the STCG on which the STT was not paid.

I sold a residential apartment in May 2016 and bought a new apartment to apply for a Section 54 capital gains exemption. However, I bought the new apartment using a home loan. To apply for the exemption, must the investment in a new property be made from the capital gains realized on the sale of the original property?
—Vineet Kumar
Article 54 of the Income Tax Act provides that in the case of an individual or a HUF, an exemption is granted for gains resulting from the sale of real estate if the investment in a new home is made in the year preceding the date of the sale or in the two years following the date of the sale up to the amount of the investment or the capital gains, whichever is less. This section does not provide for any necessary correlation between the proceeds from the sale of the original property and the funds invested in the new property. The benefit of section 54 is also allowed when the investment in a new property is made within one year before the date of sale, which means that the investment can be made even before the capital gains have been made. are carried out. For Article 54, what is relevant is the amount of the investment rather than the source of the investment. Thus, the benefit of section 54 will be allowed even if a new house is purchased using loan funds.

The writer is the founder of RSM Astute Consulting Group. Send your questions to [email protected]

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