Answer

1. F

   Facts

   Short term capital loss can be set off against any capital gain. Long term capital loss can be set off only against long term gain. Unadjusted capital loss can be carried forward for 8 years if the return is filed by the due date.

2. P

   Provisions and law

   • Sec 70 (now Sec 108)Set off within the same head: short-term capital loss against any gain, long-term loss only against long-term gain
   • Sec 74 (now Sec 111)Capital loss carried forward for 8 years; long-term loss only against long-term gains
   • Sec 80 (now Sec 121)Business and capital losses can be carried forward only if the loss return is filed by the Sec 139(1) due date
   • Sec 71 (now Sec 109)Set off of losses across heads; capital loss cannot be set off against other heads
3. A

   Analysis

   Say you have short term loss of ₹80,000 and long term gain of ₹2,00,000; the loss reduces the gain to ₹1,20,000, which is within the ₹1,25,000 exemption. A long term loss cannot reduce a short term gain. Capital losses cannot be set off against salary or other heads. Fill Schedule CFL carefully, as next year's set off depends on it.

4. C

   Conclusion

   1. 1Separate gains and losses into short and long term.
   2. 2Set off short term loss first against short term gain, then long term.
   3. 3Set off long term loss only against long term gain.
   4. 4Carry the balance in Schedule CFL if filing on time.

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