Home / Money / Personal Finance /  ITR filing: Can you set off losses in stocks to reduce your tax liability?
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No one invests in stocks for losses, the main purpose is how to grow money to beat the inflation rate which may otherwise be not possible in traditional ways of investments. However, profits have certain risks associated with it. Though these risks cannot be avoided, but you can maximise your income by setting off losses while calculating your income tax liability. Taxpayers can reduce their tax liability if they have incurred losses during the financial year by setting them off with other income.

How are income from stock markets transactions taxed

The income from stock markets transactions are taxed under two brackets. Capital gains or Profits and gains of business and profession. 

Here are the income tax rules to ease your burden of losses


Archit Gupta, Founder & CEO, Clear

Losses sustained in the stock market can be leveraged to reduce your tax liability. Income Tax Act differentiates stock market transactions as "Capital Gains" or "Business Income" depending on various factors. Capital gains are further classified into long-term or short-term depending on the period of holding of shares. A long-term capital loss can be offset only against long-term capital gains. Whereas a short-term capital loss can be adjusted against both short-term and long-term capital gains. If a loss cannot be adjusted in the current year, it can be carried forward to the following 8 Assessment Years only if the taxpayers file their ITR on time.

Amit Gupta, MD, SAG Infotech

We can understand that by converting a part of your investment losses into tax offsets, tax loss harvesting can help you transform financial losses into gains. You can make up for profits made by selling certain shares at a loss by selling other equities at a profit. Due to this, you will only owe taxes based on your net profit, which is the product of your gains minus your losses. Using tax-loss harvesting, you can reduce your tax obligation by tracking losses and offsetting profits in any other instrument. In order to utilize tax-loss harvesting effectively, underperforming funds need to be removed from the portfolio and solid funds need to be kept. When it comes to reducing a company's tax burden, tax harvesting is one of the best strategies.

ITR filing July 31 dedaline

The deadline for the last date for filing ITR is just four days away. Taxpayers must submit their ITR for the financial year 2021-22 online before the end of the deadline to avoid any fine or penalty. It is an annual activity seen as a duty of every responsible citizen of the nation.


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