Short Term Gain plus Loss
Mr. Sharma purchased stocks worth Rs. 1, 00,000 on 1/July/2008. He sold these shares on 3/November /2008 at Rs. 1, 50,000. He made a profit of Rs. 50,000
He again Purchased new securities on 2/September/2008 at Rs 2, 00,000 and sold them at Rs 50,000 on 2/February/2009. He made a loss of Rs. 1, 50,000.
His net loss for this period is Rs, 1, 00,000 (Rs. 1, 50,000 – Rs. 50,000). This loss can be carried forward by him for next 8 years, to offset against any of his future short term gain and long term capital gain (on other than exempt)
No Gain This Year but Short Term Loss
Mr Sharma did his first transaction on 28 / August /2008 and bought Rs 1, 50,000 worth of shares. On 15/ March/2009 they were valued at Rs 50,000. Here Mr Sharma has three options
Sell: He will have a short term loss (STCL) of Rs. 1, 00,000. He can carry forward this STCL for next 8 years and adjust against both long term capital and short term gain.
Sell and Buy: Mr Sharma can book losses but buy the same or different securities again at a later date to retain the shares in his portfolio. In this case he gets a STCH of Rs. 1, 00,000 which he can carry forward for next 8 years. The cost he bears in the cost of transaction and any unfavourable difference in price in buying portfolio. (Please not if the repurchased shares are sold before 12 months from the date of purchase, tax on STCG will be liveable which will offset the benefits of loss claimed in the earlier year).
Hold On: If he hold on these share for more than 12 months, the sale proceeds would qualify for long term capital gain or loss.