Explained: Long-term capital gains from shares and rebate under Section 87A for senior citizens
₹5,15,000 comprising ₹3,70,000 interest income, ₹1,20,000 long-term gain from equity mutual funds, and ₹25,000 short-term gain from equity mutual funds. I also have made short-term losses from debt-oriented mutual funds to the extent of ₹42,000.
Thus my total net capital gain is ₹1,03,000 i.e. (120000+25,000- 42000).
Am I required to carry forward Short term capital loss on debt funds or can I set it off against other capital gains? Will I get Section 87A benefits? What will be my tax liability? As per the scheme of taxation of capital gains under the income tax laws, short-term capital losses have to be first set off against short-term capital gains if any for the same financial year. If the short-term capital loss cannot be adjusted fully against short-term capital gains for the year, the net short-term capital losses have to be adjusted against the long-term capital gains for the year if available.
So short-term capital loss of ₹42,000 in respect of the debt mutual fund first will be adjusted against the available short-term capital gains from the equity mutual fund of ₹25,000 and the balance short-term loss of ₹17,000 will be adjusted against the available long-term capital gains of ₹1,20,000. So the net taxable long-term capital gains remaining after set-offs will be ₹1,03,000.
The long-term capital gains in respect of listed equity shares and equity mutual funds up to one lakh, which is perceived to be exempt, are in fact not exempt but are to be taxed at zero rates and therefore have to be included in the taxable income for the purpose of determining eligibility to avail rebate under Section 87A. Your total taxable income including long-term capital gains after set off of the losses comes to ₹4,73,000/- and thus
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