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I have Rs. 2.5 lakhs short-term capital loss carry-forward. How will it impact my tax this year?

Ramalingam

Ramalingam Kalirajan  |9403 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 14, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Shah Question by Shah on Oct 14, 2024Hindi
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Dear Sir, If i have 2.5 Lacs Short term capital loss carry forwarded of Previous year & Long term capital gain of 3 lacs from Selling Mutual Funds etc.. No Short term Capital Gain in Same Fin. Year What could be tax impact for this year.. I think Nil 1) First this will compensate against limit of 1.25 lacs as per latest Budget (3-1.25 = 1.75 lacs) & than it would be adjusted against last years Carry forwarded STCG of 2 lacs ? So it would be Nil as of Now.. and still I can get benefit of 25k next year... Pl revert if my Understanding is Correct..

Ans: Your understanding is mostly correct. The long-term capital gain (LTCG) of Rs 3 lakhs will first be reduced by the Rs 1.25 lakh exemption, leaving Rs 1.75 lakhs taxable. This Rs 1.75 lakhs can then be offset against your carried-forward short-term capital loss (STCL) of Rs 2.5 lakhs, making your taxable LTCG nil for the year. Additionally, you will carry forward Rs 75,000 of STCL to the next financial year, which can be used to offset future gains.

Best Regards,
K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Hardik

Hardik Parikh  | Answer  |Ask -

Tax, Mutual Fund Expert - Answered on Jul 24, 2023

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Dear Sir...Can the LTC Loss of Rs.3.5Lacs incurred against Flat Sale ( after 12Yrs) in May2023 can be adjusted against LTC Gains of Rs.4Lacs earned from Redemption of Eq.Shares & Mutual Funds ( after 5Yrs.) In June2023..and the Balane of Rs.50Thousand of LTC Gains be Exempted upto 01Lac. Also any Limit of upto 02Lac LTC Loss only can be adjusted against 4L LTC Gains in this FY 2023-24 and the Balance of 1.5L LTC Loss to be carried ovet in subsequent year which can be adjusted ONLY against LTC Gains earned from Property in that Year. Pl advise & Clarify...Thanks. Sanjiv Kumar.
Ans: Dear Sanjiv,

Based on the information available, it appears that you can indeed adjust your Long Term Capital (LTC) loss against LTC gains in the same financial year.

In your case, the LTC loss of Rs. 3.5 Lacs from the sale of a flat can be adjusted against the LTC gain of Rs. 4 Lacs from the redemption of equity shares and mutual funds. This leaves you with a balance LTC gain of Rs. 50,000.

As per the Income Tax Act, LTC gains up to Rs. 1 Lac are exempt from tax. Therefore, your balance LTC gain of Rs. 50,000 should be exempt.

Regarding the limit of LTC loss adjustment, there doesn't appear to be a specific limit of Rs. 2 Lacs for adjusting LTC loss against LTC gains. However, any unadjusted LTC loss can be carried forward to subsequent years and set off against future LTC gains.

Please note that this is a general interpretation based on the available information. For a more accurate understanding of your tax liability, I would recommend consulting with a tax professional or a chartered accountant who can provide advice based on a comprehensive understanding of your financial situation.

I hope this helps!

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Ramalingam

Ramalingam Kalirajan  |9403 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 09, 2024

Asked by Anonymous - Feb 04, 2024Hindi
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Hi, My projected total annual income for FY 23-24 is expected to be ? 9.6 Lacs out of which ? 6.25 would be capital gains from sale of equity mutual funds and rest would be through salary and interest income from bank and post office FD, RD and savings account. Till last year there was no tax liability as total Annual income was less. ( ? 3-3.5 Lacs ). As per calculation, capital gains tax on sale of equity mutual funds alone comes out to be ?52500 ( 10% of over and above ?1 Lac of capital gains) My query is whether I need to pay this tax of ?52500 arising on account of capital gains booked or the capital gains would be added along with other income ( salary+ interest) and then regular deductions / exemptions applicable as per Old / New tax regime would come into play so that the net tax liability becomes Zero for FY 23 - 24 as well?
Ans: Based on your scenario, here's how your capital gains tax will be calculated:

Capital Gains from Equity Mutual Funds:

You mentioned Rs. 6.25 lakh as capital gains from equity mutual funds.
Long-term capital gains (held for over 1 year) on equity mutual funds exceeding Rs. 1 lakh are taxed at 10% without indexation benefit.
Tax Calculation:

Taxable capital gains = Rs. 6.25 lakh (total capital gains) - Rs. 1 lakh (exempt limit) = Rs. 5.25 lakh
Capital Gains Tax:

You'll need to pay tax on Rs. 5.25 lakh at 10% = Rs. 52,500
Overall Tax Liability:

Here's how to determine your overall tax liability for FY 23-24:

Combine your Income Sources: Add your salary income, interest income from FDs, RDs, and savings account to the Rs. 52,500 capital gains tax.
Deductions and Exemptions: You can then factor in any deductions and exemptions you're eligible for under the Old or New tax regime (whichever offers a lower tax liability).
Net Tax Liability: After applying relevant deductions and exemptions, calculate your final taxable income. If the final taxable income falls below the minimum taxable limit, your net tax liability becomes zero.
Key Points:

Capital gains tax is calculated separately from your salary and interest income.
You can choose the tax regime (Old or New) that minimizes your overall tax liability. Explore both options using a tax calculator or consult a tax advisor for a more accurate assessment.
Remember, this is a general overview. Tax rules and exemptions can be subject to change. For a definitive assessment of your tax situation, consider consulting a qualified tax advisor who can consider all your income sources, deductions, and exemptions applicable to your specific circumstances.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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