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Capital loss set-off and carry forward with a timely return, Sec 108, 109, 111, 121 (old 70, 71, 74 and 80)

  • A capital loss can cut your capital gains tax this year and for up to 8 more years, but only if you file your return on time and show it.
  • Deadline: Return must be filed by the Sec 139(1) (now 263(1)) due date to carry forward a loss (AY 2026-27: 31 July 2026 for ITR-2). Losses carry forward for 8 assessment years.
  • Done in 1 working day after statements
  • Prepared by your Savvy, checked by a CA
  1. Broker tax P&L and MF statement
  2. Were the earlier loss years' returns filed by the due date?
  3. Build a loss register
  4. Loss register with expiry years
The law and the stepsPay and start · ₹999Yearly, + 18% GST

Answer in brief

A capital loss can cut your capital gains tax this year and for up to 8 more years, but only if you file your return on time and show it. Short-term losses can be used against any gain; long-term losses only against long-term gains. We map every loss, apply it in the best order and make sure it is carried forward in your return.

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From the official sources

What the law says, and what trips people up

From the official portal's manuals and FAQs, with the source for each point.

The law

  • Income-tax Act 1961, Sec 70(2) (now Sec 108)

    Loss on a short-term capital asset can be set off against gain on any other capital assetSource

  • Income-tax Act 1961, Sec 70(3) (now Sec 108)

    Loss on a long-term capital asset can be set off only against long-term capital gainSource

  • Income-tax Act 1961, Sec 71(3) (now Sec 109)

    Capital loss cannot be set off against income under any other headSource

  • Income-tax Act 1961, Sec 74(1) (now Sec 111) and (2)

    Unabsorbed capital loss is carried forward and set off only against capital gains, for not more than 8 assessment yearsSource

  • Income-tax Act 1961, Sec 80 (now Sec 121)

    Loss under Sec 111 (old Sec 74) can be carried forward only if determined in a return filed within the time allowed by Sec 263 (old Sec 139(3))Source

  • Income-tax Act 2025, Sec 536(2)(m) and (n)

    Losses of years before 1 April 2026 keep their character and are set off under the 2025 Act as the 1961 Act allowed; a late loss return for AY 2024-25 that failed Sec 263 (old Sec 139(3)) cannot be carried forwardSource

  • Income-tax Act 1961 to 2025 mapping

    Sec 70 becomes Sec 108, Sec 71 becomes Sec 109, Sec 74 becomes Sec 111, Sec 139 becomes Sec 263Source

  • Income-tax Act 1961, Sec 115BBH (now Sec 194)

    Loss on virtual digital assets cannot be set off against any other income, including capital gainsSource

  • Government fee

    No government fee. Source: https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/file-itr-2-online/itr-2-UM

  • Late fee or penalty

    A return filed after the Sec 263(1) (old Sec 139(1)) due date loses the carry forward of the year's capital loss (Sec 121, old Sec 80). Source: https://www.incometaxindia.gov.in/w/section-80-7 . Fee under Sec 428 (old Sec 234F) up to ₹5,000 (₹1,000 if income up to ₹5 lakh). Source: https://www.incometaxindia.gov.in/w/section-234f

On the portal

  1. e-File > Income Tax Returns > File Income Tax Return > AY 2026-27 > ITR-2
  2. Enter gains and losses in Schedule CG and Schedule 112A
  3. Check Schedule CYLA (current-year set-off) as computed
  4. Enter brought-forward losses year-wise in Schedule CFL; Schedule BFLA shows their set-off
  5. Confirm the closing losses in Schedule CFL carry to next year; file and e-verify before the due date

What trips people up

  • Loss year return filed after the due date, so loss disappears

    Always file loss returns on time; a condonation request under Sec 119(2)(b) is a separate process (CGN-LOS-02)Source

  • Revised return filed late for a loss year; AO denies carry forward

    If the original return was within the due date, tribunals have allowed carry forwardSource

  • Long-term loss used against short-term gain

    Not allowed under Sec 70(3); re-run the set-offSource

  • Schedule CFL left blank in a later year, breaking the chain

    Carry all open loss years forward each year with year-wise amountsSource

  • Crypto loss set off against share gains

    VDA losses cannot be set off against any incomeSource

People ask

Can I set off a share loss against my salary?

No. Capital losses can only be set off against capital gains.Source

How long can I carry a capital loss forward?

8 assessment years after the year the loss was first computed.Source

I filed late. Can I still carry the loss forward?

No. The loss must be determined in a return filed within the Sec 139(1) due date.Source

Will my old losses survive the new Income-tax Act 2025?

Yes. They continue and are set off under the 2025 Act in the same way the 1961 Act allowed.Source

Can I file ITR-1 if I have a loss to carry forward?

No. ITR-1 and ITR-4 cannot be used with brought forward or carried forward losses.Source

IDFD

How we solve it: 4 steps

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Step 1 of 4 · What we need from you

Tap each one you already have

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  • Broker tax P&L and MF statement
  • Last 8 years' ITR acknowledgements
  • Previous year's Schedule CFL
  • Sec 270(1) (old 143(1)) intimations for loss yearsOptional
  • Property or other asset sale workingOptional

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Yearly. Delivered in 1 working day after statements. Due: Return must be filed by the Sec 139(1) (now 263(1)) due date to carry forward a loss (AY 2026-27: 31 July 2026 for ITR-2). Losses carry forward for 8 assessment years.

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