Profit or loss on asset sales! How do you deduct capital losses to reduce your tax burden?

Based on the market's performance, equity portfolios may experience capital gains or losses due to market risk. Most individuals are unaware of how this income is taxed when purchasing and selling shares; however, they should be informed that income/loss from the sale of equity shares falls under the heading "Capital Gains." There are numerous rules and provisions for capital losses in the Income Tax Act; as a result, taxpayers should be well-versed in the methods to deduct losses on their Income Tax Returns (ITR) and reduce their tax liability, which we will discuss in this section. Rules for deducting capital losses on tax returns (ITR). To reduce tax liability, shareholders can offset market losses with gains and carry forward any remaining losses to subsequent fiscal years. Capital losses sustained from the sale of stocks or mutual funds cannot be deducted from salary. According to the Income Tax Rules, gains or losses from stock market investments are classified as capital gains/losses, business income/loss, and speculative income/loss. Based on these categories of transactions, income from stock market transactions may be taxed as capital gains or profits and gains from a business or profession. Under the header "Capital Gains," income is subdivided into Long-term and Short-term capital gains. Regardless of your tax classification, short-term capital gains are taxed at 15% if you sell equities listed on a stock exchange within 12 months of purchase. Consequently, the purchaser may realize a short-term capital gain (STCG) or incur a short-term loss (STCL). In contrast, the capital loss can be deducted against long-term or short-term capital gains for the next eight assessment years. Shareholders should be aware that equity asset sales that result in either short-term or long-term capital gains can counterbalance equity share sales that result in short-term capital losses. Under section 35AD, it may be offset by any long-term or short-term capital gains under the head of other sources of income if the shareholder fails to offset their entire capital loss in the same assessment year. In the case of long-term capital gain or loss where the holding period exceeds 12 months, long-term capital gains are taxed at 10% without indexation benefit if the sale of listed securities exceeds Rs. 1,00,000. In contrast, a capital loss can be adjusted for long-term capital gain for up to eight years. In the case of intraday trading, in which shares are purchased and sold on the same day, capital gains are treated as speculative business income and taxed according to your applicable tax bracket rates. In contrast, capital losses can only be offset against speculative income for four years. Conclusion Section 139(1) requires that to carry forward losses to the eight subsequent assessment years, and the taxpayer must submit their ITR on time. Loss under the head "Profits and gains of business or profession" may be carried forward under the Income Tax Act, even if the return of income/loss for the year in which the loss was incurred is not filed by the due date specified in section 139(1). Individuals must understand that only long-term capital gains and losses can be offset. According to the Income Tax Act provisions, a short-term capital loss can be offset by a long-term or short-term capital gain. However, a loss under the "Capital gains" head cannot be offset against income under the "Other sources of income" head.