New Income Tax Bill 2025: One-Time Relief for Long-Term Capital Losses

The New Income Tax Bill, 2025, has introduced a helpful one-time relief for taxpayers holding long-term capital losses (LTCL). From the assessment year 2026–27 onwards, taxpayers will be allowed to set off these losses against any kind of capital gains — including short-term capital gains (STCG). This is a major change from the earlier rule, where long-term capital losses could only be adjusted against long-term capital gains. 

What Has Changed in the New Income Tax Bill 2025?

Under the current Income Tax Act, 1961, taxpayers could carry forward and set off LTCL only against LTCG. This restriction often left people unable to fully use their losses if they did not have long-term gains in the future.

However, the new bill allows brought-forward LTCL (incurred up to March 31, 2026) to be set off against any capital gains — short-term or long-term — from April 1, 2026 onwards, for up to eight financial years. This is a one-time benefit, made available under clause 536(n) of the new tax bill.

Why Is the New Income Tax Bill 2025 Important?

This change gives taxpayers more flexibility. If you have losses from earlier investments, you can now reduce your capital gains tax by using them more freely. This could mean a lower tax outgo and better cash flow for the first few years under the new tax law.

How to Make Use of It?

If you are holding any investments that can give long-term losses, you could consider selling them before March 31, 2026. This way, your losses will fall under the old tax act, and you will become eligible for this one-time benefit.

From the assessment year 2026–27 onwards, these losses can be used against any gains you make, including short-term ones. However, losses made after April 1, 2026, will again fall under the usual rule — LTCL can only be set off against LTCG. 

Why Is It One-Time? 

The relief is part of the "Repeal and Saving" clause in the New Income Tax Bill 2025. This clause ensures that certain rights under the old law are preserved temporarily as we shift to the new law. It is not a permanent feature and applies only to losses incurred up to March 31, 2026.

Conclusion 

The new income tax bill gives taxpayers a one-time chance to use their past long-term capital losses more effectively. It opens doors for better tax planning, faster loss adjustment, and reduced tax burden during the transition to the new system.
 
Read more on: Tax-Free Bonds: A Tax-Efficient Way to Earn Passive Income in FY26. 

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