1. I have opt to file ITR-3 return under the new Tax regime for F.Y. 2024-2025 (A.Y. 2025-2026) 2. I have Short Term Capital Gain & Normal Business Loss, Income from house property & Other Sources of Income during the year (Gross Total Income is Rs. 6.25 Lacs) 3. I want to set-off business loss against short term capital gain instead of automatic set-off of business loss against House Property Income or Income from Other sources as per ITR online utility. 4. But online utility is not allowed to the set-off of business loss against short term capital gain. 5. Because of the above adjustment I have to pay income tax on Short term capital gain due to rebate u/s 87A is not considered for capital gain even though my total income is less than 7 Lacs. I would like to know that, is it mandatory to set-off of current year business loss against other income first then short term capital gain later as per Income tax act.

Ans: For salaried income , one can change the regime later on as well.
LTCG is capital gains and not business income unless you do intra day trading or future and options.

Ans: 01. Rental Income during last 7 years & declared in your ITRs is O.K. You have also paid taxes, if any, on the same. Matter finished here, as far as Rental Income is concerned.
02. Yes. You can use this Long Term Capital Loss of Rs.30,00,000.00, which can be carried forward & adjusted in your LTCG of next year.
Most welcome for any further clarifications. Thanks.

Ans: Understanding Your Capital Gains Scenario
You invested Rs. 93.5 lakhs in a commercial property in 2017. This property was jointly owned with your wife. The total cost, including expenses, was Rs. 1.09 crores. You sold the property in 2024 for Rs. 1.1 crore. This transaction resulted in a loss of Rs. 31.24 lakh, split equally between you and your wife.

Filing ITR2 with Capital Losses
The income tax system calculated a capital loss of Rs. 15.62 lakh for each of you. This loss has been set off against your long-term capital gains from other share transactions. The remaining loss can be carried forward.

Submit ITR2: Yes, you can finalize and submit ITR2 as shown. The system's calculation is correct.
Carry Forward and Set-Off of Capital Losses
The Income Tax Act allows you to carry forward capital losses for eight years. These losses can be set off against future capital gains.

Using Carried Forward Losses: Yes, you can use the carried forward losses to set off against future capital gains from share market transactions. This helps in reducing your taxable income in future years.
Analytical Insights
Loss Set-Off: By setting off the loss against your other gains, you reduce your tax liability for the current year. This is a strategic move.

Carry Forward Benefit: Carrying forward losses provides a cushion for future gains. It helps in managing tax liabilities efficiently.

Key Considerations
Record Keeping: Ensure you maintain all documents related to the sale and purchase of the property. This includes agreements, receipts, and tax filings. These documents are crucial for future reference and any tax scrutiny.

Tax Planning: Consider consulting a Certified Financial Planner for comprehensive tax planning. They can help optimize your investments and tax liabilities.

Future Investment Strategy
Diversification: Diversify your investments to balance risk and return. Consider mutual funds, bonds, and fixed deposits.

Risk Management: Assess the risk of each investment. Balance high-risk investments with safer options to protect your capital.

Final Insights
Managing capital gains and losses is crucial for effective tax planning. You have used the tax provisions wisely by setting off the losses against other gains. Carrying forward the remaining losses will help reduce your future tax liabilities.

By diversifying your investments and consulting with a Certified Financial Planner, you can optimize your financial portfolio for better returns and risk management.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in