Under Clause 536(n) (the “Repeal and Saving” provision) of the New Income-Tax Bill, 2025, the following change is allowed:
Any long-term capital loss (LTCL) brought forward under the old Income-Tax Act, 1961 — incurred up to March 31, 2026 — may be set off and carried forward against any capital gains (including short-term capital gains, STCG) computed under the new Act for tax years beginning on or after April 1, 2026.
The New Income Tax Bill 2025 is India’s new tax law, replacing the income tax law of 1961. Over the last 60+ years, and many patches and changes later, the government has made a new law that is shorter, easier and more user-friendly. It incorporates rules about income, rules about refunds, filing online, and all the new ways to invest in this modern age.
If you think about it, it is like your teacher says, “If you traded marbles with your friend, and lost some of them, don’t worry. You can use those lost marbles to play the candy race!”
In tax terms, LTCL refers to capital losses when you sell something you have held for a long time (a house or shares he held for a few years), whereas STCG represents profit you have made on an asset sold quickly (stocks that you held for a few months).
For the first time in history, the New Income Tax Bill 2025 allows you to combine LTCL with STCG to turn some of your losses into a way to reduce your tax bill.
Read about In & out of New income tax bill,2025 from here.
What Do LTCL & STCG Even Mean? – No Jargon
LTCL (Long-Term Capital Loss) means that you have sold something you have owned for a long time (more than 3 years), and realized less money for it than you spent on it.
STCG (Short-Term Capital Gain) is when you sell something you’ve kept for a short time—less than 3 years—and make more money than you spent on it.
Read about In & out of New income tax bill,2025 from here.
Old Rules: The Stern Teacher
Under the Income-Tax Act, 1961 law was quite firm:
“A long-term capital loss shall be set off only against a long-term capital gain.”
In practice, this meant there were no cross-matching — long-term losses could only offset against long-term gains with short term profits secured from adjustments.
Thus if you sold one of your assets (which you have held for years) at a loss (LTCL) you are not able to offset that against a short term gain (STCG).
So long-term losses were basically locked with short-term profits immediately next foot belonging to somebody else.
New Rules: The Friendly Teacher
The Income Tax Bill 2025 demonstrates a rather large change in respect of taxation of capital gains.
Previous to this, a long-term capital loss (LTCL) was allowed to be offset against long-term capital gains (LTCL) so short-term capital gains (STCG) were unable to be offset against long-term losses.
Under the new provision the law now allows a one-time offset of LTCL against STCG.
This means that taxpayers will be able to more freely substantiate taxable short-term gains by allowing it to be reduced by long term losses thereby reducing their tax payable liability in the short-term basis from offsetting application of long-term losses.
Effectively, the amendment adds way more flexibility to capital.
Read about In & out of New income tax bill,2025 from here.
The Importance of This – Real World Benefit
Earlier, if you had a long-term capital loss (LTCL) – say, selling shares you held at a loss after several years – you could not offset the LTCL against the tax arising from a short-term capital gain (STCG). The law required you to only offset long-term capital losses against long-term capital gains.
So, if you lost ₹1 lakh on a property you had owned for 5 years, and made a ₹1 lakh profit from selling shares you held for 3 months, you still had tax to pay on the ₹1 lakh short-term gain. Your loss sat there “locked away” to be used only when you had another long-term capital gain – which could be years later or never.
The new Income-tax Bill, 2025 will change this. You can now use a long-term capital losses to offset a short-term capital gain. This affords three major advantages:
Lower tax bills in bad years – Investors will be able to net off gains in one profile category against losses in a different profile immediately against taxable income.
No more “wasted” losses – Investors do not wait years for a matching long-term gain to utilize their losses.
Quick Example – Numbers That Speak
| Scenario | Old Rule (Before 2025 Bill) | New Rule (After 2025 Bill) |
|---|---|---|
| Long-Term Capital Loss (LTCL) | ₹1,00,000 | ₹1,00,000 |
| Short-Term Capital Gain (STCG) | ₹50,000 | ₹50,000 |
| Allowed Set-Off | LTCL can only be adjusted against LTCG (none here, so unused) | LTCL can be adjusted against STCG |
| Taxable Amount | ₹50,000 (full STCG taxed) | ₹0 (STCG reduced by LTCL, net loss remains) |
| Net Effect | Loss remains unused, tax still payable on gains | Loss used to wipe out gains, no tax payable |
The Fine Print – Don’t Miss This
| Point | What It Means | Why It Matters |
|---|---|---|
| One-Time Set-Off | This new flexibility applies only in the year you have both LTCL and STCG. It’s not a permanent rolling benefit for future years. | You can’t carry forward this “cross-adjustment” into later years. |
| Timely Tax Filing | You must file your income tax return within the due date to claim this benefit. | Late filing means you lose the right to adjust the losses. |
| Proof of Transactions | Keep all contract notes, broker statements, and bank proofs for your trades. | The tax department can ask for evidence to validate your claims. |
The Importance of This – Real World Benefit
The Income-Tax Bill 2025’s one-time provision allowing long-term capital losses to be set against short-term capital gains is more than a mere technical change — it is a tactical tax-saving strategy. By covering a hole in the 1961 Act, it gives individuals and businesses a chance to extract value from past losses, reduce current tax payments, and enhance cash flow. But given that this is a relief with a limited window of availability as it only comes into play during the transition to a new regime, timing and record-keeping are everything. To put it simply — this is a “use it or lose it” opportunity to turn red to green.
Review your capital gains and losses today, consult your tax advisor, and make the most of this one-time LTCL–STCG set-off before it’s gone. Waiting could mean leaving money on the table — and the deadline isn’t far away.
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