Nobody teaches this and everybody eventually needs it. Once you own listed shares, your tax filing changes — and a few decisions made before 31 March are worth more than most stock picks.
Which form
| Your situation | Form | Note |
|---|---|---|
| Salary only, no capital gains | ITR-1 | The simple one. Owning shares you have not sold does not change this. |
| Salary plus capital gains from shares or funds | ITR-2 | The common case once you start selling. |
| Intraday or F&O activity | ITR-3 | These are business income, not capital gains, and pull you into a different regime. |
Where the numbers come from
- 1Your broker’s capital gains statement
Every broker generates one for the financial year, split into short-term and long-term with the cost basis already computed. This is your primary source and it is usually a two-click download.
- 2The AIS and TIS on the income tax portal
The Annual Information Statement shows what the department already knows — every share sale reported by your broker, every dividend, every interest payment. Reconcile your statement against it before filing.
- 3Form 26AS
Tax already deducted at source on your behalf, including TDS on dividends above the threshold.
Setting off losses
Realised losses are not wasted. They can be set off against gains, which directly reduces your bill — and the rules on what offsets what are worth knowing precisely.
| Loss type | Can be set off against | Carry forward |
|---|---|---|
| Short-term capital loss | Both short-term and long-term gains | Up to 8 years |
| Long-term capital loss | Long-term gains only | Up to 8 years |
| Intraday (speculative) loss | Speculative income only | Up to 4 years |
Harvesting the annual exemption
A fixed amount of long-term capital gains is exempt each financial year. Unused, it disappears — it does not carry forward. Deliberately realising gains up to that limit and immediately rebuying resets your cost base at no tax cost, so a large future gain is spread across several exemptions instead of landing in one.
Before 31 March each year
Four things worth checking. Recall each before revealing.
Check your understanding
2 questions. Answers are revealed once you submit all of them.
1.You have a ₹80,000 short-term capital loss and a ₹2,00,000 long-term gain this year. What can you do?
2.Why must you file your return on time even in a year you made losses?
Ghar mein raashan ka hisaab alag rakha jaata hai aur shaadi ke kharche ka alag. Tax mein bhi wahi — 1 saal se pehle becha toh short-term, baad mein becha toh long-term, aur dono ka rate alag. Broker ka P&L statement download karo, sab wahi likha hota hai. Guess mat karo.
- Delivery trades are capital gains; intraday and F&O are business income and need ITR-3.
- Reconcile your broker statement against the AIS before filing.
- Short-term losses offset both kinds of gain; long-term losses offset only long-term.
- Carrying losses forward requires filing on time.
- Harvest the annual LTCG exemption — but never let tax keep you in a broken business.
Mark it done to track your progress through the curriculum.
Common questions
Short, direct answers to what people ask about this topic.
- why does my itr not match the ais
- The Annual Information Statement is the income tax department’s own record of your financial year — share sales reported by your broker, dividends, interest paid by banks, and other large transactions reported to it. It sits on the e-filing portal and is worth downloading before you file, because a mismatch between your return and the AIS is the most common trigger for a notice. Most mismatches turn out to be clerical: a forgotten account, or a corporate action recorded differently at each end.
- which itr form for capital gains from shares
- ITR-2, if you have salary or other ordinary income plus capital gains from shares or mutual funds and no business income. ITR-1 is the simplest form and cannot report capital gains at all, while intraday and F&O activity counts as business income rather than capital gains and pushes you into ITR-3, with its own bookkeeping and possible audit obligations. Merely holding shares you have not sold does not change your form.
- a short-term capital loss can be set off against
- Both short-term and long-term capital gains — the short-term loss is the flexible kind. A long-term capital loss, by contrast, can be set off only against long-term capital gains. Neither can be set off against salary, and any unabsorbed capital loss can be carried forward for up to eight assessment years provided the return for the loss year was filed by the due date.
- how many years can you carry forward a capital loss in india
- Eight assessment years for capital losses, and four for speculative losses from intraday trading. The right is conditional on filing the return for the loss year by the due date — a late filing forfeits the carry-forward entirely, which is an expensive thing to lose to a deadline. A carried-forward loss keeps its character, so a long-term loss still offsets only long-term gains in the later year.
- what is the ltcg exemption limit on shares
- ₹1,25,000 of long-term capital gains from listed equity shares and equity mutual funds is exempt in a financial year, with gains above that taxed at 12.5%. The exemption is annual and does not carry forward, so an unused portion simply lapses at the end of the year. Short-term gains on listed equity — holdings sold within twelve months — are taxed at 20% and get no such exemption.