Stock Market · Markets & Taxation

Loss set-off & carry forward rules

Trading losses aren't wasted. They can be set off against gains in the same year or carried forward to reduce future tax. But the rules are strict and vary by income type.

Set-off rules (same year)

Speculative loss (intraday equity)can ONLY set off against speculative gains

F&O loss (non-speculative business)can set off against all income EXCEPT salary

Short-term capital losscan set off against both STCG and LTCG

Long-term capital losscan ONLY set off against LTCG

> You can't mix and match freely. A ₹3 lakh intraday loss cannot reduce your salary tax bill.

Carry-forward rules

• Speculative loss: carry forward 4 years, only against speculative income
• Non-speculative F&O loss: carry forward 8 years, against business income
• Short-term capital loss: carry forward 8 years, against STCG and LTCG
• Long-term capital loss: carry forward 8 years, against LTCG only

Critical rule: file on time

You can only carry forward losses if you FILE YOUR RETURN ON TIME (by the due date, usually July 31st for most individuals).

Late filing = loss of carry-forward rights = missed future tax savings. This is the most expensive procrastination mistake a trader makes.

Practical example

Lost ₹5 lakh in F&O last year, filed on time. Made ₹4 lakh in F&O this year. The ₹5 lakh loss offsets the ₹4 lakh gain. Zero F&O tax this year.

Takeaway. Trading losses can offset gains within rules: speculative only vs speculative, LTCG only vs LTCG, F&O vs most business income. Always file on time. Late filing forfeits carry-forward rights permanently.