ITR Filing: How do we set off and carry forward capital losses?

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Income Tax Filing: As the deadline of July 31 for filing Income Tax Returns (ITR) approaches, taxpayers who have engaged in transactions involving shares, mutual funds, jewellery, real estate, and derivatives trading must ensure accurate reporting of their capital gains and losses. The correct disclosure of these transactions is essential for maintaining financial compliance and avoiding penalties.

Under Indian income tax regulations, various properties held by individuals, regardless of their professional or business connections, are categorized as capital assets. This includes:

Real Estate: Land, houses, shops, and apartments.

Financial Instruments: Shares, mutual funds and gold bonds.

Personal Items: Jewelry, precious gemstones, ornaments made from silver, gold, or platinum and artworks.

The classification of capital gains into short-term and long-term depends on the asset's holding period before its transfer. Generally, assets held for more than 36 months are considered long-term, with specific exceptions such as:

Listed Shares and Securities: Held for 12 months or more.

Unlisted Company Shares: Held for 24 months or more.

Immovable Properties: From the Assessment Year 2018-19, held for 24 months instead of 36 months.

With the growing popularity of trading in Futures and Options (F&O), understanding the tax implications of F&O losses has become increasingly important. F&O are financial instruments that enable investors to buy or sell assets at a predetermined price and date in the future. While offering significant rewards, F&O trading also carries inherent risks, including substantial losses.

For income tax purposes, F&O losses are classified as non-speculative business losses. These losses must be reported under