1. A capital loss is the difference between the purchase price and the selling price of any investment, where the selling price is lower than the purchase price.
2. Capital loss is realised only when the investment is sold for a price lower than the original purchase price.
3. For income tax purposes, under the capital gains head, the longterm capital loss can only be set off against long term capital gains.
4. However, short term capital losses can be offset against both long term and short terms gains.
5. In case one is unable to recover the entire capital loss in the same year, both the short-term and long-term loss can be carried forward for eight assessment years.
(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
