How short term capital loss can be set off against capital gain irrespective of paid STT; queries answered here

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October 23, 2017 5:23 AM

This section does not make any distinction between set-off of loss on which STT was paid or not paid. STCL can be set off against STCG where both figures are arrived at by similar computation.

short term capital loss, short term capital gain, how to set off short term capital loss, STT, paid STT, Income Tax Act, HUF, propertySection 70(2) of the Income Tax Act provides that short-term capital loss (STCL) can set off against short-term capital gain. (Image: Reuters)

I recently incurred short-term capital loss on sale of shares, on which STT was paid. I also have short-term capital gains on sale of shares on which no STT was paid. Can short term capital loss from sale of shares on which STT was paid, be set-off against short term capital gain from sale of shares on which STT was not paid?
– Ashish Chopra
Section 70(2) of the Income Tax Act provides that short-term capital loss (STCL) can set off against short-term capital gain (STCG). This section does not make any distinction between set-off of loss on which STT was paid or not paid. STCL can be set off against STCG where both figures are arrived at by similar computation. The issue whether STT is paid or not paid is relevant while computing tax liability as per Section 111A. However, Section 111A is for computation of tax liability and not for set off of losses, which has to be done before computing tax liability. As such, STCL on which STT was paid can be set off against STCG on which STT was not paid.

I sold a residential flat in May 2016 and bought a new flat to claim capital gain exemption under Section 54. However, I purchased the new flat by availing home loan. To claim exemption, should investment in new property be compulsorily made out of capital gains earned from sale of original property?
—Vineet Kumar
Section 54 of the Income Tax Act provides that in case of individual or HUF, exemption shall be allowed for gains arising on sale of house property if investment in new house property is made within one year prior to the date of sale or within two years after date of sale to the extent of the amount of investment or capital gains whichever is less. This section does not provide for any necessary co-relation required between sale proceeds of original property and funds invested in new property. Benefit of Section 54 is also allowed when investment in new property is made during a year prior to date of sale, which means that investment can be made even before capital gains have arisen. For Section 54, what is relevant is amount of investment rather than source of investment. Thus, the benefit of Section 54 will be allowed even if new house property is purchased using loan funds.

The writer is the founder of RSM Astute Consulting Group. Send your queries to fepersonalfinance@expressindia.com

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