Long-term capital losses can be offset by capital gains

I suffered a capital loss of 5 lakh on the sale of shares. Can I turn this off?

– Rajkumar Sahoo

If you have held the shares for less than 12 months from the date of acquisition, the resulting loss of 5 lakh will be qualified as a short-term capital loss (STCL). This can be set off against the short-term taxable capital gain (STCG) or long-term capital gain (LTCG), as the case may be, resulting from the sale of any fixed asset during the same financial year. If this cannot be done in the same fiscal year, then the STCL balance can be carried over to the next eight fiscal years. In each of these, said STCL can be compensated only by STCG or LTCG.

If you have held the shares for more than 12 months, the resulting loss will be referred to as a long-term capital loss (LTCL).

LTCL can only be deducted from LTCG, if any, resulting from the sale of other long-term fixed assets. In addition, any LTCL that cannot be cleared with LTCG occurring in the same fiscal year can be carried forward to the next eight fiscal years. But this can only be offset against LTCG.

Since the LTCG on listed shares for which the Securities Transaction Tax (STT) has been paid is exempt from income tax, the dominant view is that the LTCL of those shares for which the STT has been paid is exempt from income tax. paid cannot be adjusted against an LTCG from any source. In addition, said LTCL cannot be carried over to the next financial years with a view to deducting future capital gains. As a result, when selling the Equity Shares, if you had paid STT, you may not be able to offset the LTCL with the LTCG resulting from the sale of any other long-term asset, or defer this to long-term assets. future compensation purposes.

I am an Indian resident. I received shares under the Employer’s Restricted Stock Unit (RSU) Plan outside India. I later sold them after holding for a period of 13 months. Will it be considered LTCG or STCG?

-M. Ravi Teja

Since you have held the shares for more than 12 months from the date of grant, the resulting earnings will be referred to as LTCG. As you qualify as a resident of India, said LTCG will be taxable in your hands in India subject to any benefits, if any, available under the tax treaty. If said RSUs were taxable as salary income in your hands earlier on the vesting date, then the cost of acquiring the shares would be fair market value on the vesting date.

As the shares are sold outside of India, it is unlikely that you have paid STT. Thus, the resulting LTCG will be taxable at the base rate of 20.6% (including the education tax). Additionally, if your total taxable income in fiscal year 2013-14 exceeds 1 crore, you will need to pay an additional 10% on the base rate (i.e. 20%).

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