Long-term capital losses can only be offset by long-term capital gains

I had invested 30.30,000 in HERE Pru Balance Fund – Regular Plan Monthly Dividend Fund in 2017. I received monthly dividends regularly, the amount decreasing according to market conditions. As this was credited directly to my savings account, I stupidly did not try to find out its net asset value. As of April 2020 (AF 20-21), dividends have ceased to be credited. When I found out that the value had declined significantly, I redeemed the entire equity on May 29, 2020 for 04.21,000. So I suffered a loss of 9,26,280. I did not receive any dividends from this fund in fiscal year 20-21. For filing returns this year, when dividends will be part of the income, how should I treat the loss (principal amount). Can I enter in the CFL appendix the details of the losses to be carried forward to future years of the RTI-2? Can part or all of the loss (if any) be deducted from the current year income when calculating the final tax payable?

– Name not disclosed on request

ICICI Prudential Balanced Fund is an equity-focused hybrid fund and the tax treatment would be similar to that of an equity fund. In your case, since you invested in 2017, the loss will be classified as a long-term capital loss. In accordance with the provision of the Income Tax Act, long-term capital loss can only be deducted from long-term capital gains. Therefore, you can only offset this loss with a long-term gain from the previous year.

However, if you have no long-term gains, you can carry forward this capital loss for up to 8 years. To know the exact amount of the long-term capital loss, you can request a capital gain declaration from ICICI Prudential AMC as there will be an impact on the net asset value (NAV as of January 31, 2018), which has was introduced with long-term capital. tax gain on investments in equity-focused mutual funds in 2018.

You can also consult your accountant or your tax advisor on this matter for a better clarification.

– Harshad Chetanwala, Founder, Mywealthgrowth.com

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