Set-off is using a loss against income in the same year. Carry-forward is keeping what you could not use, so a later year can use it. For shares, both rules live in the capital-gains chapter. They do not let a listing loss shrink your salary.
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Open calculatorSection 108 of the Income-tax Act, 2025, which was section 70, is the same-year rule. A short-term capital loss can be set off against income from any other capital asset, so it can absorb a short-term gain or a long-term gain. A long-term capital loss can be set off only against a long-term capital gain. The gold guide states the same pair: sections 108 and 111.
Section 109(2), which was section 71, draws the line between heads of income. A loss under the head capital gains shall not be set off against income under any other head. A salary, a house-property profit, or a business profit is another head. The capital gains calculator says this in its own note: a loss on the page is not set off against your other income.
What remains is carried forward under section 111, which was section 74. The loss moves to the next tax year, and then the next, for not more than eight tax years after the year it was first computed. A brought-forward short-term loss can be set off against any capital gain. A brought-forward long-term loss only against a long-term gain. The order in the return matters: the year’s own set-off comes first, then the brought-forward loss.
Section 121 is the filing condition. No loss is carried forward under section 111 unless it was determined in a return filed under section 263(1). A return for FY 2025-26 is still under the 1961 Act, so the matching due-date rule on that return is section 139. File late, and the loss of that year can die even if the numbers are right. The ITR guide has the dates. The listing-gains guide applies the same rules to a sale below the IPO issue price. Write the loss into the return of the year you sold, even when the year’s other income already has no tax. A loss that never appears in a return is a loss the later year cannot see. The eight-year count starts from the year of the sale, not from the year you remember to claim it.
Checked on 3 November 2026. A loss you want to use next year has to be in a return that was filed by the due date.
Questions
Can a short-term loss reduce a long-term gain?
Yes, in the same year. Section 108 lets a short-term capital loss be set off against the gain on any other capital asset. A long-term capital loss can be set off only against a long-term capital gain.
Can a share loss reduce my salary?
No. Section 109(2) says a loss under the head capital gains shall not be set off against income under any other head. Salary is another head. The loss waits for a capital gain, this year or a later one.
How long can I carry a loss forward?
Up to eight tax years after the year it was first computed, under section 111. Section 121 says that carry-forward applies only if the loss was determined in a return filed under section 263(1). A FY 2025-26 return still uses section 139 for the due date.
Sources
Figures checked 3 Nov 2026.