There has been a huge increase in the number of people investing and trading in the stock markets recently. As the income tax return season begins, it is important to know if the losses that occurred in the stock market can be shown against salary income.
According to Abhishek Sonny, co-founder and CEO of Tax2win.in, losses from selling shares or mutual funds cannot be shown against salary income. However, you can offset stock market losses against stock market gains and carry over the remaining losses to the following fiscal years.
“Any loss incurred on the sale of securities, such as shares, mutual funds, etc. cannot be offset against salary income. Stock market losses can only be offset against stock market gains and the remaining losses (if any) can be carried forward to the following financial years,” Sony told FE Online.
Under the income tax rules, not all stock market transactions are treated the same. There are three different ways to classify gains or losses from the stock market – capital gains/losses; business income/loss; Income/loss speculation.
Tax experts say that depending on the nature of the transaction, any income from stock market transactions can be taxed either as capital gains or as business and career profits and gains.
Therefore, if the transaction is of an investment nature, the income will be taxed as capital gains. However, income will be taxed as profits and gains for business and profession if the transactions are carried out as a business.
If the transaction is commercial in nature and not an investment, then any loss other than the day-to-day transaction can be offset against income from any other principal except salary income.
The deadline for submitting an income tax return for 2021-2022 is December 31, 2021.