ITR Filing FY25: Can I Set Off Capital Losses Against Other Income?

If you’ve incurred capital losses on sale of capital assets during FY 2024–25, you can adjust them against other income. The Income-tax Act, 1961 has laid out clear guidelines on how capital losses can be set off and carried forward.

Here’s a simple guide to help you navigate the process when filing your ITR.

Capital Loss Can Be Adjusted Only Against Capital Gains

According to the Income-tax Act, 1961, capital losses can only be set off against capital gains. It cannot be set off from income from other sources such as salary, business, or house property.

Here’s how it works:

• Short-Term Capital Loss (STCL) can be adjusted against both Short-Term and Long-Term Capital Gains.
• Long-Term Capital Loss (LTCL) can be adjusted only against Long-Term Capital Gains (LTCG).

Carry Forward of Capital Losses

If you're unable to fully set off your capital losses in the current financial year, they can be carried forward. Both STCL and LTCL can be carried forward for up to 8 assessment years, provided you file your ITR within the due date.

Example: How Are Capital Losses Set Off?

Here’s an example for FY 2024–25 (AY 2025–26) with adjusted figures:

Mr. Rohan’s Capital Transactions for FY25:

• Short-term capital gain (STCG): ₹1,60,000
• Short-term capital loss (STCL): ₹38,000
• Long-term capital gain (LTCG): ₹92,000
• Brought forward LTCL from FY 2023–24: ₹1,10,000

Step-by-Step Adjustment

Total taxable capital gains for FY25 = ₹1,22,000

Note: The remaining ₹18,000 of LTCL (₹1,10,000 – ₹92,000) will be carried forward and can be adjusted in the upcoming years against eligible LTCGs.

Reporting Capital Losses in Your ITR Filing for FY25

While filing your return:

• Use the correct ITR form (generally ITR-2 or ITR-3 if you have capital gains/losses).
• Accurately report both current year and brought-forward losses.
• File within the deadline to be eligible to carry losses forward.

Read More: How to Report STCG on Shares in ITR-2 for AY 2025–26?

What are Capital Losses?

When you sell a capital asset like shares, mutual funds, or real estate for less than its purchase cost, the difference is treated as a capital loss.

Conclusion

Capital losses can't be used to offset non-capital income like salary or interest. However, when planned well, they can significantly reduce your tax on capital gains both now and in future years. Be sure to comply with the rules and report them correctly in your FY25 ITR.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.