Advance Tax Short and long term capital losses

Securities Transaction Tax Overview

For FY 2024-25 (AY 2025-26): Securities Transaction Tax represents a levy payable to the Government of India on transactions executed through recognised stock exchanges. Off-market transfers, where shares move between DEMAT accounts via delivery instruction slips, remain exempt from this charge. However, such off-market transactions attract higher capital gains tax rates (20% with indexation vs 10% without indexation for LTCG, and slab rate vs 15% for STCG), as previously discussed.

Current STT Rates for FY 2024-25:

Equity Delivery: 0.1% on sale value

Equity Intraday: 0.025% on sale value

Equity Futures: 0.0125% on sale value

Equity Options: 0.0625% on premium amount (on sale of options)

When calculating capital gains tax liability, STT cannot be added to the acquisition and disposal costs of shares. Nonetheless, various expenses including brokerage charges, exchange fees, SEBI levies, stamp duty, and GST paid during exchange trading can be incorporated into the share’s cost base, providing advantageous deductions against taxable gains.

Important Note: STT is automatically deducted by the stock broker at the time of transaction and remitted to the government. It appears as a separate line item in your contract notes and trading statements.

Advance Tax Obligations for Realised Capital Gains

For FY 2024-25 (AY 2025-26): Individuals generating business income or realised short-term/long-term capital gains must remit advance tax on specified dates according to the following schedule:

Advance Tax Payment Schedule:

15th June 2024: 15% of estimated annual tax

15th September 2024: 45% of estimated annual tax (cumulative)

15th December 2024: 75% of estimated annual tax (cumulative)

15th March 2025: 100% of estimated annual tax

Interest for Non-Payment/Short-Payment:

Section 234B: Interest at 1% per month if advance tax paid is less than 90% of assessed tax

Section 234C: Interest at 1% per month for deferment of advance tax instalments

Important Exemption for Salaried Individuals: If you are a salaried employee and your total tax liability (including capital gains) is fully covered through TDS deducted by your employer, you may not need to pay advance tax separately. However, if you have capital gains or business income not covered by TDS, advance tax becomes mandatory.

Who Must Pay Advance Tax:

Individuals whose tax liability exceeds Rs 10,000 in a financial year

This includes tax on capital gains (STCG/LTCG) and business income from trading

Senior citizens (60+ years) with no business income are exempt from advance tax

Stock market participants face particular challenges estimating annual capital gains based on short-term performance. Consequently, when shares are sold generating profits, prudent practice for FY 2024-25 suggests:

Calculate tax liability on realised gains immediately upon sale

Pay advance tax for those specific realised gains in the next instalment

Adjust estimates as the year progresses based on actual performance

If annual gains prove lower than projected, claim refund when filing ITR

Should annual gains prove lower than initially projected, excess payments can be recovered through tax refunds when filing returns. The Income Tax department now processes refunds relatively swiftly, typically within 2-4 months of ITR filing if the return is processed without queries.

Advance Tax Payment Methods for FY 2024-25:

Advance tax payments can be submitted electronically:

Visit the e-Pay Tax portal: https://www.tin-nsdl.com/

Select Challan No. ITNS 280

Choose “(0021) Income-tax (Other than Companies)”

Select “Advance Tax (100)” as the type of payment

Enter PAN, assessment year (2025-26), and amount

Complete payment through net banking/debit card

Alternatively, use the new e-filing portal: https://eportal.incometaxindia.gov.in/iec/foservices/#/pre-login/bl-tax-payment

For those working with a financial advisor or executing trading calls through a stock broker, maintaining awareness of advance tax obligations prevents unnecessary interest charges whilst ensuring compliance.

Practical Tip for FY 2024-25: Many traders create a separate savings account specifically for setting aside tax liability on realised gains. This ensures funds are available when advance tax becomes due and prevents the temptation to reinvest the entire profit immediately.

Selecting the Appropriate ITR Form

For FY 2024-25 (AY 2025-26): Capital gains declaration requires using either ITR-2 or ITR-3, depending on income sources:

ITR-2: Suitable for:

Individuals with salary and capital gains only

Capital gains from equity shares, mutual funds, property

Multiple house properties

Foreign income or foreign assets

Cannot be used if you have business income

ITR-3: Applicable when:

Business income exists (speculative or non-speculative)

F&O trading income

Intraday equity trading income

Professional income

Can also include capital gains and salary income

ITR-4 (Sugam): Can be used if:

Business income under presumptive taxation (Section 44AD/44ADA/44AE)

Total income up to Rs 50 lakh

Turnover/gross receipts below specified limits

Cannot be used for capital gains or loss carry forward

Key Point for FY 2024-25: If you have engaged in any F&O trading or intraday equity trading during the year, you must file ITR-3, even if your primary income is from salary. This is because F&O and intraday trading are classified as business income, not capital gains.

Understanding Capital Loss Treatment

For FY 2024-25 (AY 2025-26): Situations arise where net losses exceed gains during a given year. Under such circumstances, understanding loss treatment and carry-forward provisions becomes essential.

Short-Term Capital Loss (STCL) Treatment:

Short-term capital losses from equity investments can be:

Set off against STCG in the same year (same asset class)

Set off against LTCG in the same year (same asset class)

Carried forward for 8 assessment years if not fully utilised

Important: To carry forward losses, ITR must be filed before the due date (31st July 2025 for non-audit cases). Belated returns do not permit loss carry forward.

Consider this scenario: An investor incurs a short-term capital loss of Rs 2,80,000 in FY 2024-25. In FY 2025-26, the investor generates:

STCG of Rs 1,40,000

LTCG of Rs 80,000

Loss adjustment:

Rs 1,40,000 loss offsets STCG completely (Rs 0 tax on STCG)

Rs 80,000 loss offsets LTCG completely (Rs 0 tax on LTCG)

Remaining loss of Rs 60,000 (Rs 2,80,000 – Rs 1,40,000 – Rs 80,000) can be carried forward to FY 2026-27

The remaining loss amount of Rs 60,000 carries forward for the next 7 assessment years (total 8 years from the year of loss). This balance can offset future gains during this period, potentially reducing tax liability substantially.

Long-Term Capital Loss (LTCL) Treatment:

Following the introduction of the 10 percent long-term capital gains tax on equity (from FY 2018-19), losses can now be offset against long-term profits as well.

LTCL can be:

Set off only against LTCG in the same year (cannot offset STCG)

Carried forward for 8 assessment years if not fully utilised

Set off only against LTCG in subsequent years (restriction continues)

Example for FY 2024-25:

LTCL from equity: Rs 1,50,000

LTCG from equity: Rs 2,00,000

Tax calculation:

Net LTCG = Rs 2,00,000 – Rs 1,50,000 = Rs 50,000

Since this is below Rs 1 lakh exemption limit, no tax liability

If LTCG were Rs 3,00,000:

Net LTCG = Rs 3,00,000 – Rs 1,50,000 = Rs 1,50,000

Exemption: Rs 1,00,000

Taxable LTCG: Rs 50,000

Tax at 10% = Rs 5,000 (plus cess)

Strategic Loss Set-Off Rules for FY 2024-25

Critical Rules:

LTCL can ONLY offset LTCG (not STCG)

STCL can offset both STCG and LTCG (more flexible)

Capital losses can ONLY offset capital gains (not business income)

Business losses (speculative) can ONLY offset speculative gains

Business losses (non-speculative) can offset business income and speculative gains, but NOT salary

Loss Carry Forward Periods (Summary for FY 2024-25):

Capital losses (STCL/LTCL): 8 assessment years

Speculative business losses: 4 assessment years

Non-speculative business losses: 8 assessment years

House property losses: Can be carried forward indefinitely until fully adjusted

This asymmetry in treatment creates strategic planning opportunities for investors managing diversified portfolios.

Critical Requirement: Loss carry forward is permitted ONLY if the return is filed within the due date. For FY 2024-25:

Non-audit cases: 31st July 2025

Audit cases: 31st October 2025

Belated returns (filed after due date) do NOT allow loss carry forward, though they still need to be filed for compliance.

For equity investment participants utilising a stock screener to identify opportunities or those building positions following IPO allocations, understanding loss carry-forward provisions proves essential for tax-efficient portfolio management. Resources at https://stoxbox.in/ offer comprehensive guidance on optimising tax outcomes across various market scenarios, helping stock market participants navigate the complexities of capital loss treatment whilst maintaining compliance with regulatory requirements.

Important Advisory for FY 2024-25:

File returns by 31st July 2025 if you have any losses to carry forward—this is non-negotiable

Maintain detailed records of all loss-making transactions with contract notes

Track carried forward losses from previous years to ensure proper adjustment

Use tax planning strategies like tax-loss harvesting before year-end (covered in next section)

Consult a Chartered Accountant if you have complex loss scenarios across multiple years and asset classes

Proper documentation and timely filing ensure maximum benefit from loss carry-forward provisions, enhancing long-term after-tax returns. The ability to carry forward losses for 8 years provides significant flexibility for long-term investors and active traders alike, making it crucial to preserve this benefit by adhering to filing deadlines.