Income Tax Return 2021: Lost money in stock markets? Check if you can set it off against salary income

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Updated: October 19, 2021 11:00 AM

As the Income Tax Return filing season is on, it is important to know if losses made in the stock market can be shown against the salary income.

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There has been a massive increase in the number of people investing and trading on the stock markets recently. As the Income Tax Return filing season is on, it is important to know if losses made in the stock market can be shown against the salary income.

According to Abhishek Soni, Co-founder and CEO, Tax2win.in, losses made from the selling of shares or mutual funds cannot be shown against salary income. However, you can set off stock market losses against stock market gains and carry forward the remaining losses to the next financial years.

“Any loss incurred from sell of securities i.e. shares, mutual funds etc. cannot be set off against salary income. Stock market losses can only be set off against stock market gains and remaining loss (if any) can be carry forwarded to the next financial years,” Soni told FE Online.

Under the Income Tax Rules, all stock market transactions are not treated in the same way. There are three different ways in which gains or losses from the stock market are classified – capital gains/losses; business income/loss; speculative income/loss.

Tax experts say that depending on the nature of the transaction, any income from stock market transactions can be taxed either as capital gains or profits and gains of business and profession.

So, if a transaction is of investment in nature then the income will be taxed as capital gains. However, income will be taxed as profits and gains of business and profession if the transactions are carried out as business activity.

If the transaction is of business in nature and not investment, then any loss other than the intraday transaction can be set off against income from any other head except against the salary income.

The last date for filing Income Tax Return Filing for AY 2021-2022 is December 31, 2021.

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