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May 21, 2025
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One-time set-off of long-term capital loss against STCG: New income tax bill 2025 allows this from tax year 2026-27 onwards
The new income tax bill, 2025 has introduced a one-time relief for those who want to reduce their capital gains tax outgo by reducing their short-term capital gains (STCG). In technical terms, the new income tax bill, 2025 allows any brought forward long-term capital loss (LTCL) incurred up to March 31, 2026, to be set-off against any short-term capital gains (STCG). If you notice closely, the word is ‘any’, so it means any LTCL if incurred under the Income Tax Act, 1961 can be set-off with STCG. But since this is the New Income Tax Bill, 2025 so it is likely to be applicable from April 1, 2026 onwards i.e. tax year 2026–27 onwards
This is a big positive development especially when you consider the fact that the existing Income Tax Act, 1961 allowed long term capital loss to be set-off only against long term capital gains (LTCG). So, by opening up the feature to set-off LTCL with both LTCG and STCG, the total capital gains tax outgo of an individual may get significantly lower. This may help many taxpayers, including ones who have been carrying forward the losses and are eligible to do so for the next two years.
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